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TABLE
OF CONTENTS

Our
MISSION
We continuously aim to build an organisation
that responds to the changing views and needs
of sexual health and to develop products that
inspire better, healthier choices.

We champion social responsibility,

not just as moral imperatives but to
build better, stronger relationships with
stakeholders within our communities.

We cultivate entrepreneurship,
diversity and the desire
to excel in the things we do.

Our
VISION
To be the world’s leading provider
in sexual wellness by developing
the most creative, inspiring and
unique experiences for the global
community.
 ABOUT US
2 // Corporate Information
4 // Corporate Structure

STRATEGY &
PERFORMANCE
5 // Key Strategies
6 // Financial Highlights
8 // Chairman’s Statement
10 // CEO’s Management
Discussion & Analysis
16 // Sustainability Statement

GOVERNANCE
30 // Profile of Board of Directors
40 // Profile of Key Senior Management
44 // Corporate Governance Overview
Statement
54 // Additional Compliance Information
55 // Audit Committee Report
57 // Directors’ Responsibility Statement
58 // Statement on Risk Management &
Internal Control

62 // FINANCIAL STATEMENTS

SHAREHOLDER’S
INFORMATION
144 // List of Properties
147 // Analysis of Shareholdings
149 // Thirty Largest Shareholders
151 // Notice of 8 th Annual General Meeting

Form of Proxy
4 ABOUT US

Corporate Information

BOARD OF DIRECTORS AUDIT COMMITTEE

Tun Dato’ Seri Wong Yien Kim

Arshad Ayub Chairman
Chairman Independent
Independent Non-Executive Director
Non-Executive Director
Tun Dato’ Seri
Dato’ Dr. Ong Eng Long Arshad Ayub
@ Ong Siew Chuan Member
Senior Independent Independent Professor Dato’ Dr. Adeeba
Non-Executive Director Non-Executive Director binti Kamarulzaman
Member
Professor Dato’ Dr. Adeeba Dato’ Dr. Ong Eng Long Independent
binti Kamarulzaman @ Ong Siew Chuan Non-Executive Director
Independent Member
Non-Executive Director Senior Independent Goh Miah Kiat
Non-Executive Director Member
Wong Yien Kim Executive Director
Independent Professor Dato’ Dr. Adeeba Chief Executive Officer
Non-Executive Director binti Kamarulzaman
Member Goh Chok Siang
Law Ngee Song Independent Member
Independent Non-Executive Director Chief Financial Officer
Non-Executive Director
Law Ngee Song
Lam Jiuan Jiuan Member REMUNERATION COMMITTEE
Non-Independent Independent
Non-Executive Director Non-Executive Director Tun Dato’ Seri
Arshad Ayub
Goh Yen Yen Chairman
Non-Independent RISK MANAGEMENT COMMITTEE Independent
Non-Executive Director Non-Executive Director
Lam Jiuan Jiuan
Goh Leng Kian Chairwoman Law Ngee Song
Executive Director Non-Independent Member
Non-Executive Director Independent
Goh Miah Kiat Non-Executive Director
Executive Director Dato’ Dr. Ong Eng Long
Chief Executive Officer @ Ong Siew Chuan Goh Yen Yen
Member Member
Senior Independent Non-Independent
Non-Executive Director Non-Executive Director

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 ABOUT US 5

Corporate Information

SHARE REGISTRAR

Boardroom Share Registrars

Sdn Bhd (378993-D)
11th Floor, Menara Symphony
No. 5, Jalan Professor Khoo Kay Kim
Seksyen 13
46200 Petaling Jaya
Selangor Darul Ehsan, Malaysia
Tel : +603-7890 4700
Fax : +603-7890 4670

AUDITORS

KPMG PLT
(LLP0010081-LCA & AF 0758)
Teo Mee Hui Chartered Accountants
(SSM PC No. 202008001081) Level 3, CIMB Leadership Academy
(MAICSA 7050642) No. 3, Jalan Medini Utara 1
Medini Iskandar
NOMINATION COMMITTEE Elizabeth Allison De Zilva 79200 Iskandar Puteri
(SSM PC No. 202008002112) Johor, Malaysia
Law Ngee Song (MAICSA 7030086) Tel : +607-266 2213
Chairman Fax : +607-266 2214
Independent
Non-Executive Director REGISTERED OFFICE
BANKERS
Wong Yien Kim 10 Floor, Menara Hap Seng
th

No. 1 & 3 Jalan P. Ramlee Bangkok Bank Public Company

Member
Limited
Independent 50250 Kuala Lumpur, Malaysia
CIMB Bank Berhad
Non-Executive Director Tel : +603-2382 4288
Hong Leong Bank Berhad
Fax : +603-2382 4170
HSBC Bank Malaysia Berhad
Lam Jiuan Jiuan
RHB Bank Berhad
Member
United Overseas Bank (Malaysia)
Non-Independent MANAGEMENT OFFICE Berhad
Non-Executive Director
Lot 594, Persiaran Raja Lumu
Pandamaran Industrial Estate STOCK EXCHANGE LISTING
COMPANY SECRETARIES 42000 Port Klang
Selangor Darul Ehsan, Malaysia Main Market of Bursa Malaysia
Lim Lee Kuan Tel : +603-3165 6688 Securities Berhad
(SSM PC No. 202008001079) Fax : +603-3166 2000 Stock Name : KAREX
(MAICSA 7017753) Email : karex@karex.com.my Stock Code : 5247

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

6 ABOUT US

Corporate Structure
As at 30 September 2020

Medical-Latex Karex Global Karex Innolatex

(Dua) Limited Industries Sdn. Bhd.
Sdn. Bhd. - Hong Kong Sdn. Bhd.

Global Protection Karex Innolatex Uro Technology

Corporation Polymers (Thailand) Sdn. Bhd.
- USA Limited Limited
- Thailand - Thailand

Global Protection
Corp. UK Limited
- UK

Hevea Medical Karex Holdings Karex International Karex Marketing

Sdn. Bhd. Sdn. Bhd. Sdn. Bhd. Sdn. Bhd.

Pasante Healthcare
Limited
- UK

100% 70% 1 share

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 STRATEGY & PERFORMANCE 7

Key Strategies

CORE COMPETENCIES
We understand that in order to sustain higher growth and develop our capabilities,
we must constantly invest back into what has enabled us to stand out from
other manufacturers around the world. We constantly strive to improve our
manufacturing and distribution processes in terms of safety, quality and efficiency,
capitalising on the latest technology available in the market.

INNOVATION
Today, innovation is needed more than ever as we come to terms with new operating landscapes.
As we adapt to respond to an unprecedented global crisis, we must think outside-the-box to devise
creative solutions to challenges that were previously unimaginable.

BRANDING
We continuously work to ensure that we respond to our customers’ desires and
expectations. Building brands within our business requires us to integrate design, strategy,
marketing and sustainability from the earliest stages of product development.

HUMAN CAPITAL
Our employees around the world are at the heart of everything we do.
We aim to cultivate an environment where our employees are able to
deliver outstanding results for the business. We promote diversity and
encourage entrepreneurial spirit as we believe this will continue to give
our Group greater agility and adaptability in an increasingly volatile
environment.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

8 STRATEGY & PERFORMANCE

Financial Highlights
FINANCIAL YEAR ENDED 30 JUNE
2016 2017 2018 2019 2020

Financial Performance (RM’000)

(i) Revenue 343,617 361,452 409,591 378,484 395,067
(ii) Profit before tax 79,350 37,049 14,446 3,804 5,192
(iii) Profit attributable to owners of the Company 66,685 27,946 10,229 2,533 228

Financial Position (RM’000)

Assets
(i) Total tangible assets 525,509 496,841 488,984 498,534 524,299
(ii) Net assets 479,067 496,644 483,140 491,032 480,149
(iii) Current assets 344,328 294,840 277,500 275,885 273,577

Liabilities and Shareholders’ Funds

(i) Current liabilities 54,541 75,801 81,249 85,368 106,960
(ii) Paid-up share capital 250,594 281,980 281,980 281,980 281,980
(iii) Shareholders’ funds 479,067 496,644 483,140 491,032 480,149

Per Share
(i) Basic earning (sen) * 6.65 2.79 1.02 0.25 0.02
(ii) Net assets (RM) ** 0.48 0.50 0.48 0.49 0.48

* Based on weighted average number 1,002,375 1,002,375 1,002,375 1,002,375 1,002,375

of shares issued (‘000)
** Based on number of shares issued (‘000) 1,002,375 1,002,375 1,002,375 1,002,375 1,002,375

Financial Ratios
(i) Return on total tangible assets (%) 12.69 5.62 2.06 0.51 0.04
(ii) Return on shareholders’ funds (%) 13.92 5.63 2.09 0.52 0.05
(iii) Current ratio (times) 6.31 3.89 3.42 3.23 2.56
(iv) Gearing ratio (times) 0.05 0.04 0.06 0.07 0.11
(v) Gearing ratio net of cash (times) N/A a)
N/A a)
N/A a)
N/A a)
N/Aa)

a)
No disclosure of gearing ratio net of cash (times) as the Group is in a net positive cash flow position.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 STRATEGY & PERFORMANCE 9

Financial Highlights

PROFIT BEFORE TAX

2020
(RM’000)

5,192
2019 3,804 2019
2020 2018 14,446 2018
2017 37,049
2017
2016 79,350
2016

PROFIT ATTRIBUTABLE TO OWNERS OF THE COMPANY

(RM’000)

228
2019 2,533 REVENUE
2020 2018 10,229 (RM’000)
2017 27,946
2016 66,685

17
3,6
34
BASIC EARNING PER SHARE

52
4
(Sen) 1,
36

0.02
2019 0.25
2020 2018 1.02
2017 2.79 1 4
409,59 ,48
2016 6.65 378
7
,06
395

NET ASSETS NET ASSETS PER SHARE

(RM’000) (RM)

2020 0.48
496,644 491,032

2019 0.49

483,140 480,149
479,067 2018 0.48

2017 0.50

2016 2017 2018 2019 2020 2016 0.48

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

10 STRATEGY & PERFORMANCE

Chairman’s
Statement
DEAR TUN DATO’ SERI
FELLOW SHAREHOLDERS,
ARSHAD AYUB
Our world is experiencing a
period of unprecedented turmoil. Chairman
The COVID-19 pandemic is a painful Independent
moment in history that is testing us Non-Executive Director
not only as individuals, but also as
families, communities, businesses,
nations and as a global society.

How we respond to these challenges

reflects who we are as individuals
and as an organisation. I am
particularly proud of Karex’s response
to the pandemic. Under our CEO,
MK Goh’s leadership, the resilience
and fortitude that our employees
have demonstrated prove that there
is a strength of purpose that is rooted
deep in our culture.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 STRATEGY & PERFORMANCE 11

INTERIM DIVIDENDS PAID DURING PROPOSED FINAL DIVIDENDS TOTALLING

THE YEAR TOTALLING AN ADDITIONAL

RM5M RM5M
The COVID-19 pandemic and
corresponding Movement Control
Order implemented by the Malaysian
government meant that our facilities
were not able to operate for a period of
10 days during the year. The subsequent
manpower restrictions and additional
safety precautions also resulted in the
Group incurring idle expenses and
limited our operating capacity for a
sustained period. Our teams are still till
today having to navigate global supply
chain disruptions making it an extremely
challenging period for our Group. In spite of the challenging operating environment,
we remain committed to delivering value to our shareholders.
Notwithstanding the above, our Group In addition to the interim dividend of 0.5 sen per share
delivered a commendable performance, paid during the year, the Board has recommended a final
recording a revenue of RM395.1 million, dividend of 0.5 sen per share. If approved at our upcoming
representing an improvement from Annual General Meeting, the dividend will be paid to
the previous financial year. Although shareholders on 21 December 2020.
profitability was affected, we continued
to consolidate our position as an own Law Ngee Song has informed the Board that he will not
brand manufacturer within the sexual stand for re-election at our forthcoming Annual General
wellness industry and position our Meeting. On behalf of the Board, I would like to thank him
business to service the commercial for his dedication and wish him well for the future.
sector in response to changing
patterns in government funded condom As always, I am very grateful to my fellow Board members for
purchasing. We have also during their wisdom and guidance, especially during this period of
the year expanded our catheter and uncertainty. I would also like to thank MK Goh and his entire
lubricant manufacturing capacity at our Karex management team, our employees, our customers
Thailand facility and announced our and the wider Karex community for their commitment and
intention to venture into medical gloves. determination. Finally, on behalf of everyone at Karex,
I hope that you, our shareholders, and your loved ones keep
safe and healthy as we navigate these extraordinary times.

REVENUE OF

RM395.1M
TUN DATO’ SERI
ARSHAD AYUB
Chairman

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

12 STRATEGY & PERFORMANCE

CEO’s
Management
Discussion &
Analysis

MK
GOH
Chief Executive
O ff i c e r

INDUSTRY OVERVIEW

The COVID-19 pandemic represents one of

the greatest challenges that humanity has
faced in recent years. With over 30 million
people infected at the time of writing, the
outbreak has caused immeasurable disruption
with almost all nations struggling to slow down
transmission, develop new social protocols
and fortify their public health systems. The
resulting containment measures have caused
unprecedented economic turmoil and the
sexual wellness industry has not been spared.

The provision of condoms has long been a

cornerstone of the global fight against HIV,
however, during the pandemic, manufacturers
like ourselves have faced extraordinary
challenges to deliver condoms to key
affected populations around the world. These
disruptions coupled with volatile commodity
prices and reduced humanitarian aid budgets
have ushered in a period of unprecedented
consolidation within the industry and threatened
the world with a global condom shortage.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 STRATEGY & PERFORMANCE 13

This is especially worrying as according to the UNAIDS

Global AIDS Update 2020, 12.6 million people out
of the 38.0 million people living with HIV around
the world today are still awaiting life-saving
treatment. Progress towards ending AIDS as a
public health threat by 2030 was already off
track before the COVID-19 outbreak. This
crisis now has the potential to blow the world
even further off course. They warn that a
six-month disruption to medical supplies
could result in an additional 500,000
AIDS-related deaths in sub-Saharan Africa
alone by the end of 2021.

In order to avoid wasting decades of

progress, it is critical that we continue
to adapt our business and develop new
routes-to-market that more effectively meet
consumer needs. This requires evolving within
a consumer goods space that has continuously
transformed over the last few years with technology
improvements and “new age” consumer behaviour
changing the way that businesses interact with customers.

The severity of the COVID-19 pandemic also raised serious

safety concerns for our own employees and communities.
Safeguarding our Karex family has been a key priority amidst
our ambitions to grow as an organisation during this period.
We have undertaken several measures during this period
that are aimed at reinforcing our commitment to building a
sustainable business model for all our stakeholders. Further
details on our sustainability efforts can be found in the
Sustainability Statement on pages 16 to 29 of this Report.
OPERATIONAL HIGHLIGHTS
Much of our ability to respond quickly and appropriately
to the challenges presented during the COVID-19
pandemic has been due to the investments in our core
competencies and the efforts of our global teams.
Our Group’s unique ability to blend cutting edge
brand campaigns with market leading manufacturing
capabilities is a testament to the quality of collaboration
between our teams around the world.
We have continued to automate our manufacturing
processes in an effort to reduce our dependency on
labour and improve our quality controls during the year.
We incorporated machinery designed to improve our
packing processes in addition to several more state-of-the-
art automatic electronic testing machines during the year.
This has in turn allowed us to roll out a new manpower
redeployment plan between our facilities to more efficiently
utilise our existing pool of talent.
An improved inventory management system also yielded
significant benefits during the year. The efficient planning
and production of condom orders has become increasingly
challenging as many manufacturers struggle to cope with the
sheer variety of product variants, packaging and flavouring
that consumers are demanding in the recent times.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

14 STRATEGY & PERFORMANCE
CEO’s Management Discussion & Analysis
Our efforts to expand our capacity
and improve our processes have
resulted in a slew of notable
achievements at our Thailand
facility during the year with
an increase in overall
production of ultrathin
condoms and
award of the Industrial
Estate Authority
Thailand’s prestigious
Eco-excellence award
to name a few. Our
Thailand facility
expected to continue
to play an increasingly
important role in our Group
with the addition of additional
catheter and personal lubricant
lines completed during the year.
In a continued effort to explore new ways
of making a positive impact on the health
and wellbeing of our employees and other
stakeholders, I am particularly proud of how we
responded quickly to the developing crisis and
re-tooled several of our lubricant manufacturing
lines to produce hand sanitizers. The initial few
production runs were reserved for our staff
and donated to frontline healthcare workers.
This experience contributed to us exploring
the addition of new medical products to our
portfolio, and eventually led to our decision to
commence construction of our medical glove
facility.
We have progressively increased the utilisation
rate at our dedicated latex compounding facility.
Aside from benefiting from improved quality
consistency and cost efficiencies, we have also as
a result of this venture been admitted as a member
of the Fair Rubber Association. This provides our
customers assurance that the products purchased
from our Group will have been manufactured
with latex that contributed to an improvement of
the working and living conditions of the primary
producers of natural latex.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
In response to key public health site closures
around the USA, Global Protection Corp
launched ONE®@Home, a program to
continue supplying condoms directly to
individuals. This incorporated a partnership
with some of our largest public sector
customers, such as the Iowa Department of
the Public Health. The program was heralded
as an innovative solution to pressing public
of health issues and was subsequently featured
on the Colbert Report as well as media
publications such as Time Out.
is
I AM PARTICULARLY PROUD OF
HOW WE RESPONDED QUICKLY
TO THE DEVELOPING CRISIS AND
RE-TOOLED SEVERAL OF OUR
LUBRICANT MANUFACTURING
LINES TO PRODUCE HAND
SANITIZERS.
With the pandemic affecting many of the
routes to market in Europe, most significantly
the National Health Service with clinic closures
and redeployment of key personnel, Pasante
Healthcare Limited leveraged on its online
platforms to record encouraging sales growth
during the year. Moreover, we strengthened our
position as a medical product distributor and
private label manufacturer with the addition of
several key markets within the Europe region
during the year.
In conjunction with our commitment to
prioritising innovation within our Group,
we completed the rebuilding of our dedicated
research and development facility during
the year. The new facility was outfitted
with a full-fledged microbiological lab and
particle analysis machinery to more closely
scrutinise the quality of raw materials used
in our production processes. These additional
resources are also anticipated to assist with
our efforts to develop new materials for the
sexual health space.
 STRATEGY & PERFORMANCE 15

CEO’s Management Discussion & Analysis

FINANCIAL REVIEW Capital expenditures for the year amounted SEXUAL WELLNESS
to RM23.1 million as we incorporated
For the financial year ended 30 June greater degrees of automation into our
2020 (“FY2020”), our Group recorded a production processes and invested in the 92% 2020
revenue of RM395.1 million, representing expansion of the catheter and personal
a modest growth of 4.4% in comparison lubricant production capacity at our
to the previous financial year. This Thailand facility. This contributed to a total
2019 91%
result is encouraging as much of the non-current asset base of RM348.2 million 2018 92%
second half of the financial year was and a corresponding total asset base of
characterised by disruptions to typical RM621.8 million for the year.
customer purchasing patterns and global MEDICAL
supply chains. Product Divisions
The Sexual Wellness division consisting
During the initial stages of the COVID-19 mainly of sales of condoms and personal 6% 2020
pandemic, our Malaysian operations lubricants recorded an encouraging growth
were fully suspended for a period of 10 of approximately 5% compared to the
days. We were subsequently allowed to previous year despite the complications 2019 7%
resume operations in a limited capacity presented above. 2018 6%
for the remainder of the Movement
Control Order. In addition to the The Medical division consolidated its
detrimental effect on our manufacturing impressive performance from the previous OTHERS
output, this caused our Group to incur year with our facilities running at full
idle operations expenses that resulted capacity for much of the year. Additional
in a reduction to the overall gross profit catheter production capacity was 2% 2020
margin of 22.2% for the year. completed during the year that should
galvanize the division looking ahead.
Global logistic disruptions also resulted The Medical division is expected to play 2019 2%
in an inability to deliver finished goods a more integral role moving forward with 2018 2%
to certain customers during the second the global emphasis on personal hygiene
half of the financial year. This effect is leading to an increase in demand for
registered by the build-up of inventories medical products worldwide.
amounting to RM128.9 million at the end
of FY2020, representing an increase of
approximately 7.7% from the previous
financial year.

In spite of the challenges posed in

managing inventories during this period,
improvements to credit controls and
standardising payment terms lead to an
improvement in the cash conversion cycle
during the year. This helped us continue
to preserve agility on our balance sheet
with a sustainable cash balance of
RM46.3 million and shareholders’ funds
totaling RM480.1 million translating into
a gearing ratio of 0.11x for the year.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

16 STRATEGY & PERFORMANCE

CEO’s Management Discussion & Analysis

COMMERCIAL Market Segments

Sales to the Tender segment incurred
another challenging year with many
49% 2020 humanitarian aid programs turning
their attention towards COVID-19 relief
instead of sexual health issues. The
immediate effect on stock levels and
2019 49%
2018 49% condom accessibility within key risk
population areas prompted UNAIDS
to issue a warning that the global
TENDER response to reduce HIV, sexually
transmitted infections (“STIs”) and
unintended pregnancies over the past
33% 2020 three decades stood to be wasted if
condoms access was not prioritised
during this period.
2019 34%
2018 36% The Commercial segment continued Geographical
to replace condoms typically supplied Regions
by governments and NGOs in the past. Sales to the Africa
OBM Sales from this segment constituted and Asia regions, primarily from the Tender
an ever-changing range of product segment were impacted during the second half
varieties and packaging, testing our of the year as a consequence of global logistic
18% 2020 capabilities as a global manufacturer. disruptions. Many ports and distribution
During the year, we continued to develop networks were unable to receive and process
our relationships with several rapidly goods during this period leading to lower
2019 17% growing brands, working alongside them revenue recognition from these regions.
2018 15% to revamp their product offerings and
optimise production schedules to suit The Europe region recorded a sales increase
their respective markets. of approximately 12% from the previous year
triggered by a surge of demand for medical
Our Own Branded Manufacturing (“OBM”) products from one of the worst affected regions
segment continued to build on previous by the pandemic. We continued to consolidate
year’s performance to post yet another our position as a key sexual health distributor
all-time high revenue contribution during in the region with the addition of several new
FY2020. ONE ®
Condoms continued to distribution channels during the year.
expand its footprint with a new launch
in Thailand in addition to expanding Record high sales to Americas region
it’s e-commerce presence. Moreover, underlined our Group’s continued efforts to
the brand’s impressive performance develop the OBM Segment. Sales to this region
across various direct-to-consumer sales encompassed condom sales from all three
channels underpinned the brand’s market segments during the year. We remain
appeal to the younger generation that optimistic that we will continue to strengthen
have turned to e-commerce during the our position in the region that is well-known for
pandemic. being extremely competitive in the past.

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 STRATEGY & PERFORMANCE 17

CEO’s Management Discussion & Analysis

OUTLOOK Though the threat to public health and economic

I echo the message shared by UNAIDS in urging
the world to learn from our decades-long fight
against HIV when formulating our responses
to the COVID-19 pandemic. In an April 2020
brief, UNAIDS emphasised the need to ensure
the continuity of condom supply, distribution,
promotion by actively working with partners to
sustain condom programming throughout the
crisis. This has presented a unique challenge
to both the sexual health and medical industry
AFRICA worldwide, with the consequences of further
disruptions potentially leading to a shortage
in supply and an increased incidence of HIV,
25% 2020 STIs and unintended pregnancies especially
for members of key populations who already
face increased vulnerability in this crisis.
2019 26%
2018 25% Although it is impossible to determine the
precise course of the pandemic and its
AMERICAS economic consequences, what we can
takeaway is that condoms remain essential
tools for family planning as well as preventing
33% 2020 the spread of HIV and other STIs. The
widespread disruption to supply chains and
emphasis on social compliance has challenged
2019 29% manufacturers like never before and in the
2018 29% process caused consolidation in the industry.
ASIA It is more critical than ever that we leverage
on our manufacturing experience, cost
competitiveness and breath of offerings
23% 2020 as compelling competitive advantages to
enable us to capture orders within the sexual
wellness space that is poised for change.
2019 28%
2018 28% On the branded side of the business, we have a
strong set of brand initiatives in place to continue
EUROPE to excite and inspire our customers whilst
maintaining our ambitious growth trajectory.
Creating new ways of reaching our customers,
19% 2020 such as through e-commerce platforms or
social media, will remain critical over the next
few months as lockdowns gradually ease and
2019 17% consumers slowly regain their confidence.
2018 18%
recession is likely to persist for months to come, I
am comforted by the fact that our Group continues
to be driven by a culture of entrepreneurialism. I
have witnessed first-hand the resourcefulness
and creativity of our teams in recent months and
I am convinced that this will ultimately distinguish
us from our peers and enable us to seize
opportunities during these uncertain times.
ACKNOWLEDGEMENTS
I would like to thank our teams worldwide for
their dedication and resilience over the past
year. It will take time to heal from this terrible
pandemic but I believe now more than ever,
our communities are looking to Karex to
provide them a sense of inspiration during
this period of hardship.
I am also grateful to the Board of Directors
who have, as always, provided us invaluable
guidance through these challenging times.
Having served on the Board of Directors
at Karex since our listing in 2013,
Law Ngee Song has decided not to seek
for re-election during the upcoming AGM.
I would like to express my sincere
gratitude on behalf of our organisation
for his invaluable insight and advice over
the years. He has undoubtedly played an
integral role in our growth and I wish him all
the best with his future endeavours.
Finally, thank you - our shareholders, for
your continued trust and support, and most
especially for the privilege of leading our Group
as we continue to execute bold strategies,
develop innovative solutions and products, and
above all, ensure that sexual health is within
reach of everyone, everywhere.
MK Goh
Chief Executive Officer

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

18 STRATEGY & PERFORMANCE
Sustainability
Statement
SCOPE AND BOUNDARIES
This Statement summarises our sustainability
efforts for our stakeholders
interested parties. We aim to provide a
clear, comprehensive and
representation of our performance
managing the Economic, Environmental and
Social (“EES”) aspects of our operations.
This statement covers our EES performance
across all our entities and operations in
Malaysia, Thailand, the United States of
America (“USA”) and United Kingdom (“UK”).
It includes discussions on the material topics
identified through our materiality assessment
to provide an accurate representation of our
overall sustainability impact and performance.
The report covers the period from 1 July 2019
to 30 June 2020 and has not been externally
assured.
OUR APPROACH TO SUSTAINABILITY
Our approach to sustainability forms part of our
commitment to be a responsible corporation
for the customers and communities we serve.
We have attempted to embed sustainability
in our policies and in our four key strategies
detailed on page 5 of this Report, encouraging
it to influence our investments, operations,
stakeholder engagement and risk mitigation
efforts, amongst others.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
In an effort to ensure that the standard of
our sustainability reporting is sufficiently
comprehensive and aligned with
international best practices, we have
referenced different reporting guidelines
and frameworks.
The Global Reporting Initiative (“GRI”) is
an international independent organisation
and other that provides the world’s most widely
used standards on sustainability reporting.
transparent This statement has been prepared with
in guidance from the GRI Standards as well
as Bursa Malaysia’s Sustainability Reporting
Guide – 2nd Edition.
As a testament to our continued efforts to improve
our sustainability initiatives, Karex Berhad was
accredited as having met globally recognised
standards and admitted as a constituent of
the FTSE4Good Index in June 2020. Whilst
appreciative of this accolade, we remain
unwavering to our commitment to incorporate
more responsible business practices to position
our business for long-term growth that will be
inclusive of all stakeholders.
SUSTAINABILITY GOVERNANCE
Our strategic governance framework ensures
that we make responsible decisions that consider
the EES landscape to achieve our long-term
objectives not just for our business but for all the
stakeholders in our value chain.
 STRATEGY & PERFORMANCE 19

Sustainability Statement

SUSTAINABILITY MATTERS AMONGST

OTHERS, COME UNDER THE PURVIEW
OF OUR RISK MANAGEMENT WORKING
COMMITTEE, WHO REPORTS
DIRECTLY TO THE RISK MANAGEMENT
COMMITTEE AND ULTIMATELY OUR
BOARD OF DIRECTORS (THE “BOARD”).

Decisions are collectively reviewed and evaluated based on the

respective longstanding merits and how they fit into our Group’s
vision towards cultivating a sustainable business model.

RISK MANAGEMENT WORKING COMMITTEE

• Responsible for identifying, monitoring and reviewing material

sustainability matters under their purview
• Respective representatives take action and continue to review effects of
efforts on a periodic basis
• Reports to Risk Management Committee on material matters identified
and how they have been addressed

RISK MANAGEMENT COMMITTEE

• Reviews material sustainability matters and efforts with respective

members from the Risk Management Working Committee
• Reports to the Board of Directors based on outcome of discussions

BOARD OF DIRECTORS

• Holistically reviews Group’s sustainability efforts and approves of

Sustainability Statement for inclusion in Annual Report

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20 STRATEGY & PERFORMANCE

Sustainability Statement

STAKEHOLDER ENGAGEMENT/PRIORITISATION

We recognise that the success of business relies on developing strong and meaningful relationships with our stakeholders.
We continue to utilise various channels to foster conversations with our shareholders in order to obtain feedback, develop
ideas and provide solutions that ultimately provide more satisfaction for our customers. We have in doing so, utilised an array
of platforms and different media in order to effectively align our business strategies with our sustainability goals.

OUR STAKEHOLDERS METHODS OF ENGAGEMENT

CUSTOMERS • Campaigns • Customer surveys

1
Brand owners, governments, non-governmental • Customer service • Social networks
organisations and retail purchasers around the world • Email and video conferencing • Online forums

2 INVESTORS AND MEDIA • Annual general meetings • One-to-one meetings

Institutional and retail investors, analysts, fund • Quarterly results briefings and conference calls
managers and potential investors • Conferences and roadshows • Corporate website
• Site visits • Press releases
• Interviews

3 EMPLOYEES • Online newsletters and emails • Team building events

Our employees based in Malaysia, Thailand, • Employee surveys • Annual performance
USA and UK • Virtual meetings and appraisals
conference calls • Townhalls
• Email

4 GOVERNMENT AGENCIES • Social and compliance audits • Trade conventions

Regulators, health authorities and international • Industry and regulatory • Charity events
medical device standard agencies conferences • Local council meetings
• Meetings and briefings

5 VENDORS AND SUPPLIERS • Transactional dealings • Annual dinners and

Contractors that provide services and products • Training conferences and company sponsored
pertaining to the entire manufacturing process workshops events
chain • Outreach programmes • Supplier surveys
• Video conferencing • Email

6 COMMUNITY • Charity functions • Corporate Social

Local communities where we operate and • Sporting events Responsibility
conduct our businesses • Dialogue and knowledge programmes
exchange events

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 STRATEGY & PERFORMANCE 21

Sustainability Statement

IDENTIFICATION OF MATERIAL ISSUES

To identify matters that are most significant to our stakeholders and business, we conducted a comprehensive materiality
assessment in the financial year ended 30 June 2018. We utilised a step-by-step approach to identify a list of the most
material matters and following discussions with stakeholders, continued to refine issues that were considered material to
our business during the financial year ended 30 June 2020 (“FY2020”):

IDENTIFICATION

1
STEP
Before engaging with stakeholders to conduct an assessment, a list of material factors relating to
economic, environmental and social factors relevant to our business were identified. In an effort to focus
on the most material issues, the following factors were taken into consideration:

• Changing global and regional macroeconomic trends

• The expected developments of the Sexual Wellness, Medical and rubber products industries
• International standards and regulatory changes
• Stakeholder expectations and requirements
• Our strategies and internal policies

PRIORITISATION AND ENGAGEMENT

2
STEP
A customised online survey was conducted to engage stakeholders and determine the material
sustainability issues that most concerned each stakeholder. Issues identified were then narrowed down
into key broad categories and ranked in terms of how critical each stakeholder considered each of them.

REVIEW AND REFINE

3
STEP
The list of prioritised material matters was then verified through interviews and discussions with
operations leaders in each respective field as well as members of the Management Team and the
Risk Management Working Committee. Furthermore, we have subsequently assessed our business
strategies to ensure they have taken proper consideration of the material issues identified.

The final materiality matrix was presented and endorsed by our Risk Management Working Committee.

ASSESSMENT OF MATERIAL ISSUES

ECONOMIC ENVIRONMENTAL SOCIAL

• Procurement Practices • Water • Diversity
• Community • Energy • Health and Safety
• Supply Chain • Labour Practices
• Materials • Product and Service
Responsibility

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 22 STRATEGY & PERFORMANCE

Sustainability Statement

MATERIALITY MATRIX

In line with Bursa Malaysia’s Sustainability Reporting Guidelines, we conducted a materiality assessment through
data analysis and stakeholder engagement. We gathered insight on material matters in which we have an economic,
environmental and/or social impact, and prioritised 5 out of 10 of the issues identified.
Most influential

2 3

3
Influence on Stakeholder Assessment and Decision

4
l
cia
So

tal
men
ic on
om vir
on En
Ec
Influential

Influential Most influential

Significance of Economic, Environment and Social Impacts

Economic Environmental Social

1 Procurement Practices 1 Water 1 Diversity

2 Community 2 Energy 2 Health and Safety
3 Supply Chain 3 Labour Practices
4 Materials 4 Product and Services Responsibility

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 STRATEGY & PERFORMANCE 21

Sustainability Statement

Mapping initiatives against top material issues

ECONOMIC

We aim to ensure that business decisions are made in a manner that will not compromise our values or mission as an
organisation even if short-term benefits may be compelling. We have established a formal set of principles and practices that
our Board and Management Team strictly adhere to in order to ensure that the interest of all stakeholders is safeguarded
at all times.

1. Community

Governance Practices Risk Management Practices

A formal corporate governance structure has been
established and communicated to all stakeholders in order
to ensure that our business processes are run consistently,
decisions are made transparently and any errors are able
to be detected early so that they can be resolved. These
policies are frequently being reviewed and revised in order
to ensure that they remain relevant and effective.
All employees in our Group are guided by the principles in
the Code of Conduct. These reflect practices concerning
ethics and integrity and are communicated to all employees
during the induction process. Frequent refresher courses are
conducted by our human capital teams in order to ensure
that all employees are made aware of their responsibilities
and where they can reference them at all times.
We maintain a strict no-tolerance position regarding bribery
and corruption. In order to encourage employees to report
incidences of corruption along with any other breaches of
the Code of Conduct, we have established an anonymous
whistleblowing channel that is made known to all
employees. This channel is handled by an independent
party to ensure that all concerns are treated with
seriousness and handled with care. We have during
the past three years recorded no incidences of
bribery or corruption via this channel.
A proper risk management framework is essential in
enabling our business to pre-emptively identify possible
risks, problems or disasters before they happen, as well as
to set up procedures aimed at avoiding or minimising the
impact upon occurrence. These procedures are integral
in allowing our organisation to define our objectives for
the future and identify the external and internal risks that
may hinder accomplishment of those objectives.
Our risk management team made up of members from our
Board and Senior Management Team then come up with
strategies to guard against these risks in order to enable
more informed decision making moving forward. We are
also audited by an independent internal auditor, Moore
Stephen Associates PLT to periodically evaluate our internal
compliance and control systems. This ensures that strategic
decisions are undertaken with careful deliberation so that the
interests of all stakeholders
are always being
safeguarded.

Additional corporate governance policies are

detailed in the Corporate Governance Overview
Statement located on pages of 43 to 53 this
Report and more comprehensively in our Corporate
Governance Report that can be accessed at
http://www.karex.com.my/. These documents clearly
outline the responsibilities of our Board, the composition
details of our Board, whistleblowing policy and corporate
reporting details amongst others.
Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
22 STRATEGY & PERFORMANCE
Sustainability Statement
We have also established a formal Supplier Code of
Conduct to ensure that suppliers, contractors and other
businesses that we collaborate with are made aware of
their own social, ethical and environmental responsibilities.
These policies cover sourcing of materials, labour
practices and safety protocols amongst others and are
aimed at mutually helping all parties to ensure that risks
are properly identified and mitigated.
ENVIRONMENTAL
We aim to drive positive change through the entirety of our manufacturing processes as well as our marketing efforts.
By improving our energy efficiency, waste management and emissions levels, we will become more efficient manufacturers.
Supporting sustainable products and prudent resource management will not only help to conserve our environment but
also facilitate long term partnerships.
1. Water
Water is one of the integral inputs in our manufacturing
processes. Developing ways to use less water and recycle
waste water will enable us to reap cost savings whilst
conserving one of the world’s most precious shared
resources.
In addition to basic rain water harvesting systems
throughout our facilities that yield water for basic functions
such as cleaning the factory floors, we employ an
industrial reverse osmosis system at our Pontian facility.
In the FY2020, approximately 34% of the total water used
in our Pontian facility was recovered and treated by the
reverse osmosis system and subsequently reused in our
production processes.
The treated waste water from manufacturing processes is
collected and evaluated according to prescribed parameters
before it can be discharged. All of our manufacturing
facilities are operated in strict compliance with the relevant
industrial effluent standards to ensure that the water that is
discharged does not harm the surrounding environment and
communities that depend on it.
The methods with which manufacturers handle waste
management have also made a critical impact on the
environment in recent years. Apart from waste water
management initiatives detailed above, we have been
very conscious about how we handle the remaining rubber
waste that occurs as a consequence of our production
processes. In addition to improving processes at our Benut
scrapped rubber recycling center, we have collaborated
with Heriot-Watt University to explore new methods of
recycling and treating rubber waste.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
Our risk management practices are detailed in the
Statement of Risk Management and Internal Control
located on pages of 58 to 61 this Report. These
documents clearly outline the roles of the Risk
Management Committee as well as the key risk focuses
and mitigation plans that are in place to develop stronger
internal controls.
Percentage of Hazardous Waste & Non
Hazardous Waste Generated by all
manufacturing plants in FY2020
42%
% Hazardous
waste
58% % Non-Hazardous
waste
We make sure to store hazardous waste generated
from our manufacturing processes at specific locations
designated at our facilities. This includes waste such as
heavy metals, used solvents, spent lubricating oil, used
chemicals containers and powder sludge containing
contaminated plastic. Waste is properly segregated and
controlled by specialist teams before it is disposed by
licensed contractors.
DURING THE FY2020, WE RECYCLED
A TOTAL OF 416 MT SCRAPPED
RUBBER INTO CREPE RUBBER
THAT WERE SOLD AND REUSED
BY OTHER INDUSTRIES
Non-hazardous waste comprising of recyclable plastics,
metals and paper are either recycled or disposed of
accordingly across all subsidiaries. Initiatives that we
have implemented to reduce non-hazardous waste
include a Document Management System to reduce the
usage of paper across our Group as well as repurposing
silicone oil tanks for material and product storage.
 STRATEGY & PERFORMANCE 23

Sustainability Statement

ENVIRONMENTAL

2.Energy
ELECTRICITY
CONSUMPTION We continued to develop and revise
INTENSITY (KWH)
energy management plans across
Condoms (per gross) all our facilities in order to
2.00 2.14 2.12 minimise our environmental
and social impact on the
communities around us. We
have during the year taken
proactive steps to reduce
electricity consumption,
2018 2019 2020 setting department
specific plans across our
Catheters (per piece) manufacturing facilities
0.15 0.14 0.16 and corporate offices.

These schemes involve

a range of actions from
installing sensors at specific
production machinery to
2018 2019 2020 more accurately monitor
consumption, to switching all
GROUPWIDE LPG light bulbs to energy efficient LEDs,
CONSUMPTION (MJ)
to the installation of motion sensor

29,173,918
2020
lights. We also ensured that basic practices
such as ensuring that lights are switched off
in offices during break periods were adhered
2019 23,657,953
to. The collection of electricity data is intended
2018 27,597,493
to make staff more aware of our energy Our evaluation of our energy
consumption on a year-to-year basis as well efficiencies also extended to
CONDOM
MANUFACTURING as to enable our planning teams to more considering our usage of liquified
PLANTS accurately evaluate utility efficiencies. petroleum gas (“LPG”) during the year.
CO2 - Equivalent We began tabulating our LPG usage
Emissions, Metric Tonne
We have continued to maintain the ISO with the same intention of evaluating
1,819 14001:2015 Environmental Management the cost efficiencies that could be
1,714
System certification across all of our derived from minimising our usage of
28,032 28,206 manufacturing facilities, ensuring that each this resource over the next few years.
1,470 facility has in place an effective environmental
management system. Our Thailand facility
25,355
has been accredited the ISO 50001 Energy
Management System certification and is in the
process of being certified LEED (Leadership
2018 2019 2020
in Energy & Environmental Design) by the
Scope 1 (LPG) USA Green Building Council.
Scope 2 (Electricity)

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24 STRATEGY & PERFORMANCE

Sustainability Statement

SOCIAL

Our social sustainability ethos is centered around operating in a manner that is respectful of human rights, considerate of
ethical supply chain management and adheres to health and safety. It is critical that we constantly work with our employees,
local communities and customers to build meaningful relationships that last.

Employee Breakdown by
Gender
44%

56% 2020

Male Female

1. DIVERSITY We have continued to provide equal

opportunities for staff regardless of
Employee Breakdown by Workplace their age, ethnicity, race, gender,
Age Group
sexual orientation or beliefs, but
37% during the year, we also continued
Our employees continue to remain
our greatest assets and it is ultimately to implement initiatives aimed at
8% them who will determine if we are dissipating stereotypes across our
successful in achieving our ambitions. facilities. These include disabled
55% 2020
We continue to cultivate working toilets, removal of gender, religious
environments and a culture that is and sexual preference data from
inclusive, fair and above all, fosters recruitment criteria and the provision
mutual respect among employees. of free transportation for those
30-50
<30 years old years old To fortify this resolve, we formally employees living far away from our
>50 years old established a Diversity and Inclusion facilities that do not have access to
Policy during the year that can be public transport.
accessed on our website.
We believe in investing in our talent
and frequently conduct training in
EMPLOYEES ATTENDED related fields so that employees
A TOTAL OF 14,255 are able to broaden their skill bases
TRAINING HOURS IN and proficiencies from languages
to technical knowledge. Some of
FY2020 WITH EACH
the key training seminars attended
EMPLOYEE AVERAGING
by staff during the year included
APPROXIMATELY 5 HOURS technical training with regards to
OF TRAINING OVER THE medical devices regulations, quality
COURSE OF THE YEAR assurance, safety in the workplace,
supply chain management and waste
management to name a few.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

We have also implemented several initiatives aimed at
recognising the efforts and contributions of staff who
have gone beyond their job scope to deliver extraordinary
performances. These rewards include period spot awards,
performance-based incentives, long service awards and
the establishment of talent development programs as well
as leadership training courses aimed at developing the
next generation of management from within our Group.
In order to continue to keep an open mind with regards
to staff welfare, we have established suggestion boxes at
our facilities to continue to consider new methods with
which to improve our working environments.
During the year, we revamped communal spaces at our
facilities in Malaysia and Thailand aimed at encouraging
creative thinking and fostering more interaction amongst
staff. The new space at our Klang facility was constructed
from repurposed shipping containers. This creative and
eco-conscious use of space has become a favourite
co-working space amongst staff and even drew praise
from several notable media publications.
STRATEGY & PERFORMANCE 25
Sustainability Statement
Suppliers and Vendors for
Manufacturing Facilities
11%
89% 2020
% Local % Overseas
Local Communities
In reviewing our business continuity processes and
protocols during the year, we have made a concerted
effort to work with suppliers and vendors from our
local communities. We believe that constant interaction
and the exchange of business ideas would foster
mutually beneficial long-term business relationships.
These include working with organisations such as the
Ethical Trade Initiative to develop accountability for issues
such as human rights and labour practices in order to
ensure that proper risk management safeguards
were implemented throughout the supply chain
process. This would in-turn ensure that the
communities in the vicinity of our businesses
would not be excluded from the success of
our business moving forward.
We continue to engage with the youth in
our communities through various methods.
Over the last 3 years, we have collaborated
with the Malaysian Rubber Council and
local universities to host over 50 graduates
as interns in our facilities across our Malaysia
and Thailand facilities to provide them with
real-world working experiences within the rubber
industry. Many of these graduates elected to join
as full-time employees following the completion of
their internships.
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26 STRATEGY & PERFORMANCE
Sustainability Statement
SOCIAL
Corporate Social Responsibility Programs
Malaysian AIDS Foundation (“MAF”)
We continued working hand-in-hand with MAF as one of
Malaysia’s leading non-profit organisation dedicated to the
Support, Treatment & Care Programme for AIDS, Community
Empowerment, HIV Education and Policy Works to protect the
interest of People Living with HIV. Together with MAF, Karex’s
efforts targeted potential parties needing support in marginalised
communities – including single mothers and children, homeless,
People Living with HIV (PLHIV) needing a second chance at life
and other B40 communities.
Through our programs with MAF nationwide we have managed
to provide education through roadshow and engagements
throughout Malaysia on the importance of sexual wellness.
By establishing as many engagements as possible with PLHIV
and marginalised communities we are able to provide assistance
aimed at improving quality of life.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
Through these various activities and programs
MAF and Karex have cultivated a pool of
partnerships to facilitate the development of
more support programs nationwide.
Malaysian Business Consortium
on HIV/AIDs (“MBCH”)
MBCH is a coalition of business sectors
collaborating to reduce the impact of stigma
and discrimination of PLHIV in workplaces.
HIV/AIDS has a negative impact on the
overall economic growth and especially
towards the profitability of small enterprises.
Together with MBCH, Karex has piloted
programs to inform employers and recruiters
that this does not have to be the case.
Karex recognises although HIV/AIDS remains
a serious public health problem, our revised
employment policy on HIV/AIDS is aimed at
creating a safe working environment without
discrimination for all employees to achieve
their potentials irrespective of health status.
Whilst we have taken the necessary steps
to prevent the transmission of HIV/AIDS,
we still aim to provide affected employees
a healthy and safe work environment at all
operation levels.
MBCH is supported by the Department of
Occupational Safety & Health (DOSH) of
Ministry of Human Resources, Malaysia and
Ministry of Health Malaysia in line with their
National Strategic Plan for Ending AIDS
2016 - 2030.
“The initiative of MBCH at the Malaysian
AIDS Foundation to have a regulation in
place to protect the rights and manage
HIV positive employees at the workplace
in Malaysia should be given attention.” –
Tun Dr. Mahathir Mohamad.

The Body Shop
In order to combat the spreading of HIV/AIDS,
Sexually Transmitted Infections (“STI”) and educate the
general public in Malaysia on sexual wellness, ONE
Condoms created a special packaging and provided
12,000 packs of specially-packaged ONE Condoms for
®
the purpose of this partnership. The special packaging
was made exclusively for Body Shop and is available
in all outlets nationwide (except Sabah & Sarawak).
Proceeds from sale are channeled into MAF’s general
HIV presentation and treatment fund for various
projects.
Datin Mina Cheah (Managing Director of Body Shop),
Jasmin Jalil (Executive Director of MAF), Deborah
Henry, Aaron Aziz, Fahrin Ahmad (all Red Ribbon
Celebrities) with MK Goh (CEO of Karex) were present
with media and invitees during the launch at SOGO, KL.
Community Healthcare Clinic (“CHCC”)
Working alongside the PT Foundation Community
Health Care Clinic is a community healthcare clinic
offering testing, treatment and counselling with sexual
health concerns. Karex has constantly strived to break
the barriers with testing and treatment of STI in Malaysia
with a focus on improving the accessibility of HIV care
for the most vulnerable and underserved populations in
the Klang Valley. During the FY2020, Karex purchased
a GeneXpert machine at a cost of RM107,500 for
CHCC to enable their clinical services to improve their
services offered and expand their testing methods.
They are now able to provide same-day services for
HIV positive clients and carry out confirmatory tests
while quantifying a patients’ viral load within a span
of a few hours of a positive screening test result. As
such, clients at CHCC can expect an immediacy of care
and treatment which is not possible in other clinics and
hospitals in Malaysia today.
STRATEGY & PERFORMANCE 27
Sustainability Statement
Pertubuhan Kebajikan dan Kesihatan Umum
Malaysia (“PKKUM”)
Since PKKUM’s unfortunate fire in 2017, Karex relocated,
®
refurbished and restored PKKUM’s operations to a new
facility in a short span of time. Since the reopening
of PKKUM’s facility, it has managed to run its drop-in
clinic providing non-discriminatory support and day-
time shelter for the homeless including mothers and
children.
Other services include providing assistance to
marginalised and underrepresented communities,
organising health programs and activities with the aim
of creating a more sexual health conscious community.
They aim to provide assistance for those that require
it in a manner that is non discriminating and non-
judgmental. They have also utilised this platform
to spread awareness on the need for self-care and
promoted preventive approaches for HIV/AIDS, STI’s
and other pertinent diseases.
To date Karex has donated a sum of more than
RM200,000 for rental, amenities, refurbishment,
renovations and the donation of condoms and
personal lubricants.
Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
28 STRATEGY & PERFORMANCE

Sustainability Statement

SOCIAL

Art Against AIDS (“AAA”)

Since its debut in 2015 – Art Against AIDS (fondly known

as AAA) is an annual charity event hosted by Karex
every December. In our efforts to combat the stigma of
HIV/AIDS through education and awareness we have
teamed up with prominent youth groups, NGO’s,
corporations and universities including renowned gallery;
Segaris Art Gallery in Publika, Kuala Lumpur to create a
link between large corporations like Karex and various
youth communities.

Raising close to RM1 million to date – AAA has

gained nationwide attention by providing a platform
for corporations and NGO’s, to interact with students
and the art community. All funds raised during AAA
are disseminated to identified bodies catering to those
affected by HIV/AIDS and other pertinent sexual health
issues. Encouragingly, AAA’s reputation as an event that
promotes sexual health through the medium of art and
design has spread to neighboring Singapore and Brunei
lately as we have received requests from students to
participate.
University Engagements
Karex takes pride in becoming the first condom company
in Malaysia to begin establishing strong relationships
with colleges throughout the nation. Our
education partners today include the nation’s largest
university – Universiti Teknologi MARA, Universiti Malaya,
International Medical University, SAITO
College, Malaysian Institute of Art and many more. During
the year, we conducted vigorous nationwide engagements
with the universities that involved providing sexual
health education workshops on sexual health. During
workshops, students are informed of various scenarios of
potentially risky sexual behavior as well as provided with
education on sexual health. While education surrounding
sexual wellness is still relatively taboo in Malaysian
society especially, we have strived to construct a safe, yet
engaging environment whereby participants do not incur
any judgement and are encouraged to ask our speakers
anything about the subject.
Kakak
Kondom
In collaboration with MAF, Kakak Kondom is
an animated character that was developed
and inspired by university students providing
educational content surrounding sexual wellness
and health. Since her debut in February 2020,
Kakak Kondom has engagement of 20,000
people on social media with the support of
MAF’s platform and our tertiary partnerships.
tertiary
Project Condom
University ONE® Condoms helps student groups and
non-profits in the USA host condom fashion
shows through its Project CONDOM program.
The goal of these events is to destigmatise
conversations about sexual health. In FY2020,
partnerships included Planned Parenthood,
University of West Florida, and Clayton State
University. During the COVID-19 pandemic,
Global Protection Corporation donated
thousands of condoms to health organisations in
need, enabling them to in turn focus available
funds for their sexual health programs and
outreach.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 STRATEGY & PERFORMANCE 29

Sustainability Statement

Global Protection Corporation 2.HEALTH AND SAFETY

also worked with advocates
in the USA to educate people Our Occupational Safety and Health Policy provides our employees
about the difference that proper with comfort that they are always able to operate within a safe and
condom fit makes to comfort, injury-free space. These guidelines extend not only to employees but
pleasure, and resultantly in also to visitors and contractors who conduct work at our facilities.
helping increase condom use. Our safety programs cover a range of procedures including emergency
This included providing free response, first-aid, evacuation and fire-fighting.
condom educational materials
to over 300 organisations As a result of the strict adherence to these policies, all our manufacturing
across the country, including plants in Malaysia comply to the Occupational Safety and Health Act
donating more than 1994 (Act 514). Our Senai facility in particular is certified ISO18001 for its
15,000 myONE® occupational health and safety management systems. These regulations
FitKit measuring require a safety committee to be established consisting of both employer
tools and and employee representatives, safety inspections to be carried out at
e d u c a ti o n a l fixed intervals and hazards to be identified and reviewed around the
materials. workplace. These help to ensure adequate health and safety programs
are in place to reduce risk of injuries at all times.

In a continued bid to prioritise the health and comfort of our employees,

in addition to being provided the appropriate protective gear,
we have ensured that ammonia detection meters have been installed
at our facilities to safeguard the quality of air. This is an example
of an initiative that was introduced following suggestions from our
employees who work in these areas.

FOR THE FY2020, LOSS TIME INCIDENT

FREQUENCY RATE WAS REGISTERED
AT 0.15% ACROSS OUR CONDOM
MANUFACTURING FACILITIES. THIS
REFERS TO THE AMOUNT OF LOST TIME
RESULTING FROM INJURIES OCCURRING
IN THE WORKPLACE PER ONE MILLION
MAN-HOURS WORKED.

Should accidents occur, we have always ensured that our staff

are always afforded immediate access to medical attention
and are adequately covered by health insurance and medical
care in the event of emergencies. Health and safety notices
are on all site notice boards in a multitude of languages so that
employees are always made aware as to emergency protocols.

This Sustainability Statement is made in accordance with the

resolution of the Board dated 9 October 2020.

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TUN DATO’ SERI

ARSHAD AYUB
Chairman
Independent Non-Executive Director

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Tun Dato’ Seri Arshad Ayub was appointed to the Board
on 30 November 2012 as our Chairman and Independent
Non-Executive Director. He is the Chairman of the
Remuneration Committee and a member of the Audit
Committee.
Tun Dato’ Seri Arshad Ayub graduated with a Diploma
in Agriculture from the College of Agriculture, Serdang,
Selangor in 1954 and later obtained a Bachelor of Science
(Honours) Economics and Statistics from University of
Wales, Aberystwyth, United Kingdom in 1958. In 1964, he
obtained a postgraduate Diploma in Business Administration
from Management Development Institute (now IMD),
Lausanne, Switzerland.
He has had a distinguished career in the Malaysian Civil
Service, where he held various senior positions in various
Ministries in the Malaysian Government from 1958 till
1983, including serving as Deputy Governor of Bank
Negara Malaysia (1975-1977), Deputy Director General
in the Economic Planning Unit of the Prime Minister’s
Department (1977-1978) and as Secretary General in the
Ministry of Primary Industries (1978), Ministry of Agriculture
(1979-1981) and Ministry of Land and Regional Development
(1981-1983). He was also a Member of Justice Harun’s
Salaries Commission for statutory bodies.
Tun Dato’ Seri Arshad Ayub is Pro Chancellor of Universiti
Teknologi MARA, Chancellor of INTI International
University and was formerly Chairman of the board of
directors of University Malaya and Chancellor of KPJ
Healthcare University College.
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Profile of Board of Directors
He is a Governor of Tuanku Jaafar College, Chairman of
PINTAR Foundation, Trustee of Amanah Raya Berhad
Foundation, Chairman of Lembaga Pemegang Amanah
Kolej Islam Malaya Berdaftar, Director of Lion Education
Foundation, Patron of Arshad Ayub Foundation, Advisor of
Yayasan Budiman and a member of Tun Razak Foundation,
Pak Rashid Foundation, Lung Foundation of Malaysia and
Advisor of Malaysian Malay Businessman And Industrialists
Association.
Presently, Tun Dato’ Seri Arshad Ayub sits on the board
of directors of Malayan Flour Mills Berhad. He is also a
member of the board of PFM Capital Sdn. Bhd., Ladang
MOCCIS Sdn. Bhd., and Zalaraz Sdn. Bhd. (a family-
owned company).
He has attended all the Board Meetings held during the
financial year ended 30 June 2020. He does not have
any family relationship with any Director and/or Major
Shareholder of the Company and has no conflict of interest
with the Company. He has not been convicted of any
offences within the past 5 years other than traffic offences,
if any. There were no sanctions and/or penalties imposed
on him by any relevant regulatory bodies, which were
material and made public during the financial year ended
30 June 2020.
The particulars of his shareholdings are set out on page 147
of this Annual Report
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DATO’ DR. ONG ENG LONG
@ ONG SIEW CHUAN
Senior Independent Non-Executive Director
Dato’ Dr. Ong Eng Long was appointed to the Board on 29 July
2013 as our Senior Independent Non-Executive Director and
also a member of the Audit Committee and Risk Management
Committee. He graduated from University of Malaya with a
Bachelor of Science (Hons) Degree in 1969 and obtained a
PhD from Queen Mary College, London in 1973.
He started of at the Rubber Research Institute of Malaysia
(“RRIM”) as a Senior Research Offcer in 1973. He has held
different positions in RRIM up to 1998 when it merged with two
(2) other organisations to form the Malaysian Rubber Board.
He was the former Deputy Director General of the Malaysian
Rubber Board from 1998 to May 2001 and the former Deputy
CEO of Malaysian Rubber Export Promotion Council from
2001 to 2008.
Dato’ Dr. Ong Eng Long has been the Technical Advisor for
Kossan Rubber Industries Bhd. since July 2008. He has been
involved with standards development for the past two decades.
Dato’ Dr. Ong was the Chairman of ISO/TC 157 Non-Systemic
Contraceptives and STI Barrier Prophylactics from 2007 till
Dec 2017 and the Chairman of ISO/TC 45 SC4 Rubber
Products Other Than Hoses from 2005-till Dec 2017.
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ISO/TC 157 is the technical committee that is responsible
for, amongst others, the international condom standards
while ISO/TC 45 is responsible for, also amongst others,
international rubber glove standards. Dato’ Dr. Ong has more
than 150 publications in areas of rubber science and latex
dipped products.
Dato’ Dr. Ong Eng Long is the Immediate Past President of
the Malaysian Rubber Product Manufacturers’ Association.
He was the President of the Institute of Chemistry, Malaysia
from March 2014 till March 2018.
He has attended all Board Meetings held during the financial
year ended 30 June 2020. He does not have any family
relationship with any Director and/or Major Shareholder
of the Company and has no conflict of interest with the
Company. He has not been convicted of any offences within
the past 5 years other than traffic offences, if any. There
were no sanctions and/ or penalties imposed on him by any
relevant regulatory bodies, which were material and made
public during the financial year ended 30 June 2020.
He does not hold any directorship in other public companies
and listed issuers.
The particulars of his shareholdings are set out on page 147
of this Annual Report

PROFESSOR DATO’ DR. ADEEBA
BINTI KAMARULZAMAN
Independent Non-Executive Director
Professor Dato’ Dr. Adeeba binti Kamarulzaman was appointed
to the Board on 16 January 2019 as our Independent
Non-Executive Director. She is a member of the Audit and
Risk Management Committees.
She graduated from Monash University in 1987 and trained
in internal medicine and infectious diseases at the Monash
Medical Centre and Fairfield Infectious Diseases Hospital,
Melbourne, Australia.
She is presently the Dean of Medicine at University of Malaya
and an Adjunct Associate Professor at Yale University, USA.
She established the Centre of Excellence for Research in
AIDS (CERiA) that conducts multi-disciplinary research on HIV
ranging from clinical studies to public health and policy research.
She is also the current Chairwoman of the Malaysian AIDS
Foundation and an Executive Council member of the Malaysian
AIDS Council. She is the President-Elect of the International AIDS
Society and a member of the UNAIDS Scientific Expert Panel on
HIV. She has been an advisor to numerous WHO committees
on HIV/AIDS and was a two term Co-Chair of the Strategic and
Advisory Committee on HIV for the World Health Organisation.
She has played a critical role in the establishment and operations
of TREAT Asia, a regional HIV research network funded by the
American Foundation for AIDS Research (amfAR).
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Her achievements have been recognised through several
national and international awards including the Tun Mahathir
Science and Merdeka Awards for her role as a member of the
University of Malaya’s Nipah Investigative Team. She is also the
first recipient of the Advance Australia Global Award in the category
of Alumni in 2012, and, in April 2015 she was honoured with a
Doctor of Laws (honoris causa) from her alma mater, Monash
University. She has the distinct honour of having her achievements
featured in both The Lancet and Science publications in 2013
and 2014 respectively.
She has attended all Board Meetings held during the financial year
ended 30 June 2020. She does not have any family relationship
with any Director and/or Major Shareholder of the Company and
has no conflict of interest with the Company. She has not been
convicted of any offences within the past 5 years other than traffic
offences, if any. There were no sanctions and/or penalties imposed
on her by any relevant regulatory bodies, which were material and
made public during the financial year ended 30 June 2020.
She does not hold any directorship in other public companies
and listed issuers.
The particulars of her shareholdings are set out on page 147
of this Annual Report
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WONG YIEN KIM
Independent Non-Executive Director
Wong Yien Kim was appointed to the Board on 30 November
2012 as our Independent Non-Executive Director. He is the
Chairman of the Audit Committee and a member of the
Nomination Committee.
He has retired from his role as Senior General Manager,
Finance of Kumpulan Perangsang Selangor Berhad. He was
also the Vice President, Finance of Kumpulan Darul Ehsan
Berhad from 1 January 2000 to 9 May 2011. In addition,
between 2007 to 2013, he served as a member of the
board, the audit committee and the investment committee
of Taliworks Corporation Berhad.
Wong Yien Kim has been a member of the Malaysian
Institute of Accountants and the Institute of Chartered
Accountants England and Wales since 1982.
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He has attended all the Board Meetings held during the
financial year ended 30 June 2020. He does not have
any family relationship with any Director and/or Major
Shareholder of the Company and has no conflict of interest
with the Company. He has not been convicted of any
offences within the past 5 years other than traffic offences,
if any. There were no sanctions and/or penalties imposed on
him by any relevant regulatory bodies, which were material
and made public during the financial year ended 30 June
2020.
He does not hold any directorship in other public companies
and listed issuers.
The particulars of his shareholdings are set out on page 147
of this Annual Report

LAW NGEE SONG
Independent Non-Executive Director
Law Ngee Song was appointed to the Board on 30 November
2012 as our Independent Non-Executive Director. He is the
Chairman of the Nomination Committee, a member of the
Audit Committee and Remuneration Committee. He graduated
from Australia National University with a Bachelor of
Commerce degree and Bachelor of Laws degree in 1987 and
1989 respectively. He was admitted as Advocate and Solicitor,
High Court of Malaya in 1991.
Law Ngee Song practiced as a legal assistant in Allen &
Gledhill from 1991 to 1995 and was subsequently promoted to
partner of the firm in 1995. He was then a Partner at Messrs
Nik, Saghir & Ismail in 1996 and on 2 April 2019, he joined
Azmi & Associates as a Partner for Merger & Acquisition/
Corporate Practice.
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Law Ngee Song has been on the board of directors of Evergreen
Fibreboard Berhad since 2007 and has been serving as the
chairman of the board since 2010. He is also a non-executive
independent director of Anglo-Eastern Plantations PLC,
a company listed on the London Stock Exchange.
He has attended all the Board Meetings held during the
financial year ended 30 June 2020. He does not have any family
relationship with any Director and/ or Major Shareholder of the
Company and has no conflict of interest with the Company.
He has not been convicted of any offences within the past
5 years other than traffic offences, if any. There were no
sanctions and/or penalties imposed on him by any relevant
regulatory bodies, which were material and made public
during the financial year ended 30 June 2020.
The particulars of his shareholdings are set out on page 147
of this Annual Report
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LAM JIUAN JIUAN
Non-Independent Non-Executive Director
Lam Jiuan Jiuan was appointed to the Board on 30
November 2012 as our Non-Independent Non-Executive
Director. She is the Chairwoman of the Risk Management
Committee and a member of the Nomination Committee.
She brings with her, a vast 35 years of experience from the
financial and corporate management industry.
Lam Jiuan Jiuan started out in 1976, where she joined the
Commercial Banking Company of Sydney, as a management
trainee, where she gained a wide spectrum of retail banking
experience before moving on to join Tricontinental Australia Limited
in 1978. In 1979, she moved to Hong Kong and joined Toronto
Dominion Bank in its Asia and Australasia Division, responsible for
credit approvals of banks/corporate and monitoring country limits.
In 1986, she joined the Canadian Imperial Bank of Commerce for
three (3) years as the Corporate Marketing Manager in charge of
major public listed companies and as well as corporate company
accounts. She joined Barclays Bank PLC in 1989 as a private
banker and resigned in June 2015 as a Senior Banker in the bank’s
Wealth Investment Management Division.
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Subsequently, she worked in a private family office of one of
the leading property developers in Hong Kong and had since
retired in 2016. She has since been with the Hong Kong
Office of Zedra Group, a major independent trust, corporate
and fund services group, as Private Clients Advisor.
She graduated with a Bachelor of Economics majoring in
Accounting and Commercial Laws from the University of
Sydney, Australia in 1976. She is also a Fellow of Certified Public
Accountant, Australia as well as a member of the Hong Kong
Registered Financial Planners. She has attended all Board
Meetings held during the financial year ended 30 June 2020.
Goh Yen Yen and Goh Leng Kian are her siblings and
Goh Miah Kiat is her nephew. She is the spouse of Lam Yiu
Pang, Albert, a major shareholder of the Company. She has no
conflict of interest with the Company and has not been convicted
of any offences within the past 5 years other than traffic offences,
if any. There were no sanctions and/or penalties imposed on
her by any relevant regulatory bodies, which were material
and made public during the financial year ended 30 June 2020.
She does not hold any directorship in other public companies
and listed issuers.
The particulars of her shareholdings are set out on page 147
of this Annual Report
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GOH YEN YEN
Non-Independent Non-Executive Director

Goh Yen Yen was appointed to the Board on 30 November
2012 as our Executive Director in Administration with over
20 years of experience in handling human resource, finance
and administration system, internal quality auditing and
also hands-on experience in budget, control and overhead
cost and capital expenditure.
She is a member of the Remuneration Committee. On
31 August 2018, she was re-designated from Executive
Director to Non-Independent Non-Executive Director. She
graduated with a Bachelor Degree of Art in Geography
with Honours from the University of Malaya in 1969. Prior
to joining Karex in 1996, she was a teacher in various
secondary schools in Johor for 26 years.
She has attended all the Board Meetings held during the
financial year ended 30 June 2020. Goh Leng Kian and
Lam Jiuan Jiuan are her siblings and Goh Miah Kiat is her
nephew. She has no conflict of interest with the Company
and has not been convicted of any offences within the past
5 years other than traffic offences, if any. There were no
sanctions and/or penalties imposed on her by any relevant
regulatory bodies, which were material and made public
during the financial year ended 30 June 2020.
She does not hold any directorship in other public companies
and listed issuers.

The particulars of her shareholdings are set out on page 147

of this Annual Report

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GOH LENG KIAN
E x e c u t i v e D i r e c t o r, Te c h n i c a l a n d R & D
Goh Leng Kian was appointed to the Board on
27 September 2012 as our Executive Director in Technical
and Research and Development (“R&D”). He has over
30 years of experience in the rubber and latex industry.
Goh Leng Kian’s experience includes the establishment of
the condom and catheter manufacturing plants, exposing
him to a wide spectrum of roles including the supervision
and management for the detail design, construction,
installation, commissioning and testing of all related
equipments, systems as well as the facilities of the projects.
Goh Leng Kian’s career started in 1980 with Ban Seng
Hong Sdn. Bhd. as a Mechanical Engineer, where he
was in charge of the engineering unit for the company’s
rubber processing facilities. He joined our Group in 1988.
He is currently responsible for overseeing our Group’s
manufacturing facilities, including production and technical
matters.
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This includes the construction and development of our
condom dipping lines, electronic testing and foiling
machines, R&D activities such as improving the dipping
process, new automation to improve production efficiency
and product quality and overall yield of the factories as
well as sourcing of new packaging machinery. Goh Leng
Kian graduated with a Bachelor of Science Degree with
Honours in Mechanical Engineering from the Loughborough
University of Technology, UK in 1979.
He has attended all the Board Meetings held during the
financial year ended 30 June 2020. Goh Yen Yen and
Lam Jiuan Jiuan are his siblings and Goh Miah Kiat is his
nephew. He has no conflict of interest with the Company
and has not been convicted of any offences within the past
5 years other than traffic offences, if any. There were no
sanctions and/or penalties imposed on him by any relevant
regulatory bodies, which were material and made public
during the financial year ended 30 June 2020.
He does not hold any directorship in other public companies
and listed issuers.
The particulars of his shareholdings are set out on page 147
of this Annual Report

GOH MIAH KIAT
Executive Director
Chief Executive Officer
Goh Miah Kiat was appointed as our Chief Executive Officer
on 29 July 2013. He became an integral part of our Group
since 1999 and for over 10 years, he has been overseeing the
marketing and logistics, international business dealings, brand
development and coordination activities. He is a member of
the Risk Management Committee. He was appointed to Board
on 25 February 2020 as our Executive Director.
Goh Miah Kiat has been acting as a representative of
Malaysia in TC 157 (the technical committee for the
standardisation of non-systemic contraceptives and STI
barrier prophylactics) since year 2000.
Throughout his career, Goh Miah Kiat has actively contributed
to the development and promotion of condoms in Malaysia.
He played a part in the development of the following:
• Global condom standard ISO4074
• MS ISO 16037:2010 in association with SIRIM, Malaysia
• ISCR/TC 8 - Non Systematic Contraceptives and STI Barrier
Prophylactics
He was named winner of the Master and Overall categories of
the Ernst & Young Entrepreneur of the Year 2016 Malaysia award.
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Goh Miah Kiat graduated with a Bachelor’s Degree in
Economics and Management from the University of Sydney
in 1999. He is currently a member of the Board of Trustee,
member of the Marketing Committee and member of the
Scholarship Committee in the Malaysian Rubber Export
Promotional Council.
He has attended all the Board meetings held during the financial
year ended 30 June 2020. He is the nephew of Goh Yen Yen,
Goh Leng Kian and Lam Jiuan Jiuan, the Board members of the
Company. He has no conflict of interest with the Company and
has not been convicted of any offences within the past 5 years
other than traffic offences, if any. There were no sanctions and/or
penalties imposed on him by any relevant regulatory bodies, which
were material and made public during the financial year ended
30 June 2020.
He does not hold any directorship in other public companies
and listed issuers.
The particulars of his shareholdings are set out on page 147
of this Annual Report
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C h i e f Fi n a n c i a l O ff i c e r

Goh Chok Siang was appointed as our Chief Financial Officer
in April 2013. He obtained his professional qualification from
the Association of Chartered Certified Accountants and has
been a Chartered Accountant with the Malaysian Institute
of Accountants since 1999. He is a member of the Risk
Management Committee.
He has over 20 years of experience in overseeing a variety
of finance functions and served as Lion Group’s Chief
Accountant in 2007 where he was responsible for, amongst
others, corporate exercises and financial reporting. He
was also a Director in Wong Chau Hwa & Co, a public
accounting firm where he was involved in strategy and
business development prior to joining Karex.
He does not have any family relationship with any Director
and/or Major Shareholder of the Company and has no
conflict of interest with the Company. He has not been
convicted of any offences within the past 5 years other
than traffic offences, if any. There were no sanctions and/
or penalties imposed on him by any relevant regulatory
bodies, which were material and made public during the
financial year ended 30 June 2020.
He does not hold any directorship in other public companies
and listed issuers.

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LEONG WENG HONG
Chief Human Resources Officer

Leong Weng Hong was appointed as our Chief Human He does not have any family relationship with any Director
Resources Officer in April 2015. He holds a Bachelor of and/or Major Shareholder of the Company and has no
Commerce Degree from Curtin University of Technology, conflict of interest with the Company. He has not been
Perth, Australia. He has over 20 years of experience in convicted of any offences within the past 5 years other
human resource management including management roles than traffic offences, if any. There were no sanctions and/
and functions in project start-ups, regional and global HR or penalties imposed on him by any relevant regulatory
services hubs in various countries. bodies, which were material and made public during the
financial year ended 30 June 2020.
Following his graduation in 1994, he started his career with
Public Bank. He does not hold any directorship in other public companies
and listed issuers.
Prior to joining Karex, he was with Bechtel Group, Inc. for
17 years. He served in their pioneer Kuala Lumpur office
before embarking on international assignments in China,
USA, UK, Chile, Australia and Canada over the next
14 years. He returned to Malaysia under Talentcorp’s,
Returning Expert Programme.

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Chief Strategy Officer

Wong Your Can was appointed as our Chief Strategy
Officer in October 2016. He holds a Bachelor of Business
in Accountancy from RMIT University, Melbourne, Australia.
He obtained his professional qualification from the Certified
Public Accountant, Australia and is currently a Chartered
Accountant with the Malaysian Institute of Accountants.
He began his career in the financial services industry with
roles in financial reporting and assurance, gaining exposure
across various industries. Following that, he accumulated
working experience in the corporate finance space having
raised funds in both the equity capital markets as well as
debt capital markets. He was also involved in originating
and executing a number of mergers and acquisitions.
He does not have any family relationship with any Director
and/or Major Shareholder of the Company and has no
conflict of interest with the Company. He has not been
convicted of any offences within the past 5 years other
than traffic offences, if any. There were no sanctions and/
or penalties imposed on him by any relevant regulatory
bodies, which were material and made public during the
financial year ended 30 June 2020.
He does not hold any directorship in other public companies
and listed issuers.

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CORPORATE GOVERNANCE
OVERVIEW STATEMENT
Principle A Principle B Principle C
Board Leadership Effective Audit And Integrity In Corporate
And Effectiveness Risk Management Reporting And Meaningful
Relationship With
Stakeholders

– Page 43 - 53 –

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Corporate
Governance
Overview
Statement

PRINCIPLE

THIS CORPORATE GOVERNANCE

A
OVERVIEW STATEMENT IS PRESENTED
PURSUANT TO PARAGRAPH 15.25(1) BOARD LEADERSHIP
AND EFFECTIVENESS
OF THE MAIN MARKET LISTING I. Board Responsibilities
II. Board Composition
REQUIREMENTS (“MMLR”) OF BURSA III. Remuneration

MALAYSIA SECURITIES BERHAD

(“BURSA SECURITIES”).

B
The objective of this Statement is to 28 October 2020. Shareholders may
provide an overview of the application obtain the CG Report by accessing EFFECTIVE
of the corporate governance practices this link http://www.karex.com.my/ for AUDIT AND
of the Group during the financial year further details and are advised to read RISK MANAGEMENT

ended 30 June 2020 with reference
to the three (3) main principles, i.e.
Board Leadership and Effectiveness,
Effective Audit and Risk Management
and Integrity in Corporate Reporting
and Meaningful Relationship
Stakeholders as set out
Malaysian Code on
Governance 2017 (“MCCG”).
The Board has also provided more
disclosures on the application of each
Practice in its Corporate Governance
Report (“CG Report”). The CG Report
was announced together with the
Annual Report of the Company on
this overview statement together with I. Audit Committee
II. Risk Management
the CG Report. and Internal Control
At the start of the financial year 2020,
Karex was not a “Large Company”
with as defined in the MCCG. Overall the
in the Board is of the view that the Company
Corporate has, in all material aspects, complied C
INTEGRITY
with the Principles and Practices as set IN CORPORATE
out in the MCCG except for Practice REPORTING AND
7.2 on the disclosure of the top five MEANINGFUL RELATIONSHIP
WITH STAKEHOLDERS
senior management’s remuneration
I. Communication with
on a named basis. The explanation for Stakeholders
the departure of the abovementioned II. Conduct of General
Meetings
practice is reported in the announced
CG Report.

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Corporate Governance Overview Statement
PRINCIPLE A
BOARD LEADERSHIP AND
EFFECTIVENESS
I. BOARD RESPONSIBILITIES
It is the overall governance responsibilities of the Board to
lead and control the Group. The Board, while overseeing the
strategic direction and conduct of the business, leads the Group
within a framework of effective controls and has embraced the
responsibilities listed in the MCCG to effectively discharge the
Board’s stewardship and fiduciary responsibilities.
The Board has defined and formalised its Board Charter and
it is published on the Company’s website. The Board Charter
serves as a reference for the Directors’ fiduciary duties and
the functions of the Board Committees. The Board reviews the
Board Charter periodically to ensure that it remains relevant
and consistent with the Board’s objective, regulations and best
practices. The Board is also guided by key matters reserved
for the Board for its deliberation and decision to ensure that
the direction and control of the Group’s businesses vested in
its hands are managed and attended to effectively.
Certain Board’s authorities and discretion are delegated and
conferred on the Executive Director and the Chief Executive
Officer (“CEO”) as well as on properly constituted Committees
comprising Non-Executive Directors which operate within
clearly defined Terms of Reference (“TOR”).
There is a clear division of responsibilities between the
Chairman and CEO to ensure an optimum and effective
segregation of duties and authority. These key individuals
play a vital role in bringing the Group to greater heights of
success whilst ensuring strong foundation blocks of corporate
governance, transparency and integrity form part of its
fundamentals.
The Board is currently led by Tun Dato’ Seri Arshad Ayub, an
Independent Non-Executive Chairman who provides strong
leadership, instils and monitors good corporate governance
practices, leadership and effectiveness of the Board.
The CEO, Mr Goh Miah Kiat is responsible for the overall
day-to-day running of the Group’s operating units and
implementation of the Group’s policies and strategic plans
established by the Board within a set of authorities delegated
by the Board.
GOVERNANCE 45
The detailed roles and responsibilities of the Chairman and
the CEO can be found in the Board Charter on the Company’s
website at http://www.karex.com.my/.
The Executive Directors and CEO are responsible for making
and implementing operational and corporate decisions while
the Non-Executive Directors balance the Board’s accountability
by providing their independent views, advice and judgment to
safeguard the interests of the shareholders.
The Board has unrestricted and timely access to all
information necessary for the discharge of its responsibilities.
Also, all Directors have access to the services and advice
of Management and other independent professionals, at the
expense of the Group in the discharge of their duties.
The Board has identified Dato’ Dr. Ong Eng Long @
Ong Siew Chuan as the Senior Independent Non-Executive
Director, an alternative person for shareholders to approach
in order to convey their concerns and seek clarification from
the Board.
WHISTLEBLOWING POLICY
The Company has established a Whistleblowing Policy to
provide clear lines of communication and reporting of concerns
for employees at all levels. The channel for communication for
whistleblowing can be made to the Board Chairman, Audit
Committee Chairman or Senior Independent Non-Executive
Director via email to karex@whistleblowing.com.my or post to
the following mailbox which is handled independently by the
Group’s Internal Auditor:
Moore Stephens Associates PLT
Suite 133, MBE Tropicana Gardens Mall,
LG-21, Tropicana Gardens Mall,
Jalan 2A, Tropicana Indah,
47410 Petaling Jaya,
Selangor Darul Ehsan, Malaysia.
The Whistleblowing Policy is published on the Company’s
website.
Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
46 GOVERNANCE

Corporate Governance Overview Statement

PRINCIPLE A
BOARD LEADERSHIP AND
EFFECTIVENESS

I. BOARD RESPONSIBILITIES

COMPANY SECRETARY BOARD COMMITMENT

The Board is assisted by three The underlying factors of Directors’ commitment to the Group are devotion of
(3) qualified and competent time and continuous improvement of knowledge and skill sets. The Board meets
Company Secretaries. All Company at least once every quarter and on other occasions, as and when necessary, to
Secretaries are members of inter-alia approve quarterly financial results, statutory financial statements, the
Malaysian Institute of Chartered Annual Report, business plans, acquisition and expansion as well as to review
Secretaries and Administrators. the performance of the Company and its operating subsidiaries, governance
The Company Secretaries advise matters and other business development matters.
the Board, particularly with regards
to compliance with regulatory The Board papers are circulated to the Board members prior to the Board
requirements, guidelines, legislations meetings so as to provide the Directors with relevant and timely information
and the principles of best corporate in order to enable them to conduct proper deliberation on board issues and to
governance practices. discharge their responsibilities with reasonable due care, skills and diligence.

Further information of the roles and During the financial year, five (5) Board meetings were held. The record of
responsibilities carried out by the attendance of the Board members is as follows:
Company Secretaries are set out in
Practice 1.4 of the Company’s CG Meeting
Report. Director Attendance
Tun Dato’ Seri Arshad Ayub 5/5
[Chairman
Independent Non-Executive Director]
Dato’ Dr. Ong Eng Long @ Ong Siew Chuan 5/5
[Senior Independent Non-Executive Director]
Professor Dato’ Dr. Adeeba binti Kamarulzaman 5/5
[Independent Non-Executive Director]
Wong Yien Kim 5/5
[Independent Non-Executive Director]
Law Ngee Song 5/5
[Independent Non-Executive Director]
Lam Jiuan Jiuan 5/5
[Non-Independent Non-Executive Director]
Goh Yen Yen 5/5
[Non-Independent Non-Executive Director]
Goh Leng Kian 5/5
[Executive Director]
Goh Miah Kiat 1/1
[Executive Director]
(Appointed on 25 February 2020)
[Chief Executive Officer]

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))


I. BOARD RESPONSIBILITIES
The Directors recognise the need to attend trainings to enable them to discharge their duties effectively. The training needs
of each Director would be identified and proposed by the individual Directors or Nomination Committee.
The following are the trainings attended by the Directors during the financial year:
Director
Tun Dato’ Seri Arshad Ayub
[Chairman
Independent
Non-Executive Director]
Dato’ Dr. Ong Eng Long @
Ong Siew Chuan
[Senior Independent
Non-Executive Director]
Professor Dato’ Dr. Adeeba
binti Kamarulzaman
[Independent
Non-Executive Director]
Wong Yien Kim
[Independent
Non-Executive Director]
Law Ngee Song
[Independent
Non-Executive Director]
Lam Jiuan Jiuan
[Non-Independent
Non-Executive Director]
Goh Yen Yen
[Non-Independent
Non-Executive Director]
Goh Leng Kian
[Executive Director]
Goh Miah Kiat
[Executive Director
Chief Executive Officer]
GOVERNANCE 47
Corporate Governance Overview Statement
Trainings Attended
• Special Conference - Federalism in Malaysia
• Bursa Malaysia Thought Leadership Series
• Khazanah Mega Trends Forum
• IRRDB International Rubber Conference 2019
• Corporate Liability Provision under Section 17A of the MACC Act 2009 – Option 3
• Conference on Forced Labour - Issues and Mitigation
• Symposium on Scientific Development of Rubber, Areca and Coconut Industry of Hainan
• Achieving 100:100:100 + Zero HIV Transmission is Warranted to #endAIDS
• Controversies in Infectious Disease
• The Asia Pacific and International Perspectives on Health Partnerships
• Leaders in Education - Innovation and Strategy for the Future of Higher Education
• Utopia Scientific Congress 2019 - Updates on Medical Ethics and Medical Law
• Australian Sexual Health and HIV and Aids Conference - Stigma and Discrimination:
Overcoming Barriers to Healthcare in Our Region
• Asia Pacific Medical Education Conference - How to Nurture Values in a Fast Changing and
Evolving Healthcare Landscape
• COVID-19: Serology for SARS-CoV2: Where Are We?
• Commonwealth Civil Society Policy Forum 2020 - Strengthening Health Systems with Digital
Technologies in Midst of the COVID-19 Pandemic to Ensure Universal Health Coverage
• Virtual Programming with the U.S Embassy Kuala Lumpur: UM and Yale - The Race to
COVID’s End
• Prison Health and Drug Use Amidst COVID-19 in Malaysia
• Sustainability and Digitalisation – a New Normal
• Financial Markets Code of Conduct
• COVID-19 Impact on Cross Border Transactions
• Corporate Liability Provision Under Section 17A of the MACC Act 2009
• Women in Leadership
• Countering Bribery and Corruption
• Advanced Spear Phishing and General Data Protection
• BNP 2020 Investment Theme Webinar
• Whistleblowing with Confidence
• How to be an Effective Non-Executive Director in a Disruptive World
• How to be an Effective Non-Executive Director in a Disruptive World
• Mandatory Accreditation Programme
Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
48 GOVERNANCE
Corporate Governance Overview Statement
PRINCIPLE A
BOARD LEADERSHIP AND
EFFECTIVENESS
II. BOARD COMPOSITION
The Board has nine (9) members comprising one (1)
Independent Non-Executive Chairman, one (1) Senior
Independent Non-Executive Director, three (3) Independent
Non-Executive Directors, two (2) Non-Independent Non-
Executive Directors, and two (2) Executive Directors,
constituting majority independent directors. The present
composition of the Board is in line with Practice 4.1 of the
MCCG as more than half of its members are independent
Directors.
Pursuant to the Constitution of the Company, an election of
Directors shall take place each year at the Annual General
Meeting of the Company, where one-third of the Directors
for the time being, or nearest to one-third shall retire from
office and be eligible for re-election.
Mr Law Ngee Song, an Independent Non-Executive
Director, will retire by rotation in accordance with Clause
97 of the Constitution of the Company and had indicated
he will not seek for re-election. Accordingly, he will retain in
office until the close of the 8th Annual General Meeting.
The Board values independence greatly as it is important
for ensuring objectivity and fairness in the Board’s decision
making. All Independent Directors of the Board comply with
the criteria of ‘independent directors’ as prescribed in the
MMLR.
The Board has adopted the following practices of the MCCG
in order to uphold the independence of the Independent
Directors:
i. Subject to the Board’s justification and shareholders’
approval, the tenure of Independent Directors should
not exceed a cumulative term of nine (9) years; and
ii. Assessment of independence of its Independent
Directors focusing on events that would affect the
ability of Independent Directors to continue bringing
independent and objective judgment
deliberation and the regulatory definition of Independent
Directors.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
An Independent Director may continue to serve the
Board upon completion of the nine (9) years subject
to re-designation of the Independent Director as a
Non-Independent Director. The Board may continue to retain
an Independent Director who has served a cumulative term
of nine (9) years, by providing justification for its decision
and seeking shareholders’ approval. For the financial year
under review, none of the current Independent Directors
have served the Company for more than nine (9) years
cumulatively.
The Board is satisfied with the level of independence
demonstrated by the Independent Directors and their ability
to act in the best interest of the Company and/or the Group.
The Board members have diverse backgrounds and
experiences in various fields. Collectively, they bring
a broad range of skills, experience and knowledge to
direct and manage the Group’s businesses. Championing
diversity and equality within the Group, the Board provides
fair and equal opportunities to individuals regardless of
age, race or gender. As such, there are three (3) capable
female directors sitting on the Board, accounting for 33.33%
of the Board’s composition. The Board embraces diversity
in the boardroom and views diversity as an imperative and
believes that diversity is required to support the execution of
its business strategy. Therefore, a diversity of perspectives
coming from different walks of lives and various experiences
at the Senior Management level of the Group is also highly
cultivated. Accordingly, the Board does not discriminate
against any board member and board candidate on the
grounds of race, gender, nationality, religious, sexual
orientation and family status.
The Diversity Policy can be found on the Company’s website
at http://www.karex.com.my/.
to board
 GOVERNANCE 49

Corporate Governance Overview Statement

II. BOARD COMPOSITION

NOMINATION COMMITTEE (“NC”) The NC assists the Board in reviewing the composition of
the Board members annually and ensures that the current
The NC is established and maintained to ensure that there composition of the Board functions competently and effectively.
are formal and transparent procedures for the appointment
of new directors to the Board and for the performance The NC has conducted two (2) meetings during the financial
appraisal of directors. The current NC comprising Non- year and a summary of key activities undertaken by the NC
Executive Directors with a majority being the Independent in discharging its duties are as below:,
Non-Executive Directors are as follows:
• Reviewed and assessed the performance and
Chairman : Law Ngee Song effectiveness of the Board as a whole, the Board
Member : Wong Yien Kim Committee, and the contribution of each individual
Member : Lam Jiuan Jiuan director;

The TOR sets out the duties and functions of the NC and • Reviewed and assessed the independence of
can be found on the Company’s website. Independent Directors;

The Board recognises the value of appointing individual • Reviewed and recommended to the Board the
directors who bring a diversity of opinions, perspectives, appointment of a new Director;
skills, experiences, backgrounds and orientations to its
discussions and decision-making processes. In this context, • Reviewed and recommended to the Board, the
and with the Board’s mandate, the NC establishes criteria to re-election of the Directors who will be retiring at the
appraise its Board members focusing on: forthcoming Annual General Meeting;

• Constructive interaction during board meetings; • Reviewed and assessed the terms of office and
performance of the Audit Committee (“AC”) and each of
• Quality inputs and sharing of insights on board agenda; its members; and

• Board meeting attendance and preparation; and • Reviewed and assessed the performance of the Senior
Management
• Independence for Independent Directors.
Based on the NC’s assessment, the Board concluded that
The NC is responsible for reviewing and making the current size and composition of the Board is optimum
recommendation of any appointments to the Board for and balanced. Utilising diverse skills, experience and
approval based on the size of the Board, the mix of knowledge, the Board as a whole and its Board Committees
skills, experiences and other qualities of the candidates. have been effective in discharging their functions. The
The Board utilises independent sources if needed to NC and the Board are generally satisfied with the level
identify suitably qualified candidates for new appointment of independence demonstrated by all the Independent
to the Board. Directors and their ability to bring independent and objective
judgment to the Board deliberations. The NC also opined
that the AC and all its members have carried out their duties
in accordance with the TOR.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

50 GOVERNANCE

Corporate Governance Overview Statement

PRINCIPLE A
BOARD LEADERSHIP AND
EFFECTIVENESS

III. REMUNERATION

Remuneration Committee (“RC”)

The RC is responsible for reviewing and recommending to the Board the remuneration policy and remuneration packages of
Directors and Senior Management. Composition of the RC are as follows:

Chairman : Tun Dato’ Seri Arshad Ayub

Member : Law Ngee Song
Member : Goh Yen Yen

The TOR sets out their duties and functions of the RC and can be found on the Company’s website.

The RC reviews annually the remuneration packages of Executive and Non-Executive Directors for recommendation and
approval by the Board. The remuneration of Directors is determined at levels which enables the Company to attract and retain
Directors with the relevant experience and expertise to manage the business of the Group effectively. All Directors shall abstain
from participating in the decision making of his or her remuneration.

The RC also evaluates the Senior Management’s remuneration based on their Key Performance Indicators, experience,
expertise, skills and industry benchmarks. This remuneration is maintained at a level which enables the Company to attract,
develop and retain high performing individuals with the relevant experience and expertise.

During the financial year, one (1) RC meeting was held to review and recommend the adjustment of directors’ remunerations
and fees for the Board’s and shareholders’ approval respectively.

Subject to the shareholders’ approval at the forthcoming Annual General Meeting, the proposed Non-Executive Directors’
fee for the financial year ended 30 June 2020 is RM640,000 whilst their benefits, comprising of meeting allowances are
proposed to be capped at RM61,000 for the period from 1 December 2020 to 30 November 2021.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 GOVERNANCE 51

Corporate Governance Overview Statement

III. REMUNERATION

Directors’ Remuneration

The breakdown of the Directors’ remuneration for the year ended 30 June 2020 are as follows:

Group Company
Salaries,
Bonuses &
Director Fees1 Allowances2 Benefits3 EPF Total Fees1 Allowances Total
RM RM RM RM RM RM RM RM
Tun Dato’ Seri 120,000 6,000 - - 126,000 120,000 6,000 126,000
Arshad Ayub
Dato’ Dr. Ong 90,000 6,500 - - 96,500 90,000 6,500 96,500
Eng Long @
Ong Siew Chuan
Professor Dato’ 80,000 5,000 - - 85,000 80,000 5,000 85,000
Dr. Adeeba binti
Kamarulzaman
Wong Yien Kim 90,000 6,500 - - 96,500 90,000 6,500 96,500
Law Ngee Song 90,000 6,500 - - 96,500 90,000 6,500 96,500
Lam Jiuan Jiuan 90,000 5,000 - - 95,000 90,000 5,000 95,000
Goh Yen Yen 80,000 3,500 - - 83,500 80,000 3,500 83,500
Goh Leng Kian - 515,000 28,000 92,660 635,660 - 3,000 3,000
Goh Miah Kiat 4
- 246,000 9,333 46,550 301,883 - 500 500
640,000 800,000 37,333 139,210 1,616,543 640,000 42,500 682,500

1
Fees paid to Non-Executive Directors
2
Salaries, bonuses and meeting allowances for Directors’ attendance at each Board and Board Committee meeting
3
Benefits in terms of car-related benefits
4
Appointed as Executive Director on 25 February 2020

Senior Managements’ Remuneration

The Board deliberated and concluded that the disclosure of Senior Managements’ remuneration including the top five key
management personnel in the Audited Financial Statements was adequate. This approach was arrived at having taken into
consideration the sensitivity of Senior Managements’ remuneration packages and the potential privacy, security and staff
poaching issues that may arise due to disclosure.

The Board wishes to provide shareholders assurance that the remuneration of Senior Management is continuously evaluated
based on individual performance and potential to contribute in relation to the Group’s overall performance.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

52 GOVERNANCE
Corporate Governance Overview Statement
PRINCIPLE B
EFFECTIVE AUDIT AND RISK
MANAGEMENT
I. AUDIT COMMITTEE (“AC”)
The Board has established an effective and independent
AC, comprising highly accredited members who have vast
experience in various fields. Presently, the AC comprises solely
Independent Non-Executive Directors and the Chairman of
the AC is not the Chairman of the Board.
The responsibilities, composition and summary of work of the
AC are outlined in the AC Report on pages 55 to 56 of this
Annual Report.
The AC complies with the recommendation of MCCG requiring
all members to be independent and at least one member
fulfils qualifications prescribed by the MMLR. Independence
is an essential element for the AC members to fulfil their roles
objectively and to provide critical and sound views in ensuring
the integrity of financial controls and integrated reporting,
while identifying and managing key risks. All members of the
AC are financially literate.
The AC has adopted a policy that requires a former key audit
partner to observe a cooling-off period of at least two (2) years
before being appointed as a member of the AC and the said
policy has been incorporated in the TOR of the AC which is
available on the Company’s website.
The Board has defined its policy on suitability and
independence of External Auditors engaged to assess, review
and evaluate the Group’s financial matters. In accordance
with this policy, the AC will review the qualification, audit
performance and execution, provision of non-audit service
and tenure of service of the External Auditors. Annually, the AC
also reviews the appointment, performance and remuneration
of the External Auditors before recommending them to the
shareholders for re-appointment during the AGM.
KPMG PLT, the existing External Auditors of the Company, has
in place a policy on rotation for partners of an audit engagement
to ensure objectivity, independence and integrity of the audit.
The External Auditors have declared their independence to
the Group and their compliance with By-Laws (on professional
ethics, conduct and independence) of the Malaysian Institute
of Accountants.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
II. RISK MANAGEMENT AND INTERNAL
CONTROL
The Board acknowledges its overall responsibilities for
establishing and maintaining a sound risk management and
internal control systems, and for reviewing its adequacy and
integrity.
The Board has an established on-going process for identifying,
evaluating and managing significant risks which may affect the
Company’s business objectives. The Board through its Risk
Management Committee (“RMC”) reviews this process to
ensure the internal control and risk management framework is
adequate and effective. The present composition of the RMC
are as follows:
Chairwoman : Lam Jiuan Jiuan
Members : Dato’ Dr. Ong Eng Long @ Ong Siew Chuan
: Professor Dato’ Dr.Adeeba binti Kamarulzaman
: Goh Miah Kiat
: Goh Chok Siang
The details of the Group’s risk management and internal
control framework are disclosed in the Statement on Risk
Management and Internal Control on pages 58 to 61 of the
Annual Report.
The Internal Audit Function is outsourced to Moore Stephens
Associates PLT, a chartered accounting firm. The Internal
Audit function is headed by an Executive Director, with the
support of a manager to oversee the audit assignments and an
average of two (2) executives to carry out the audit fieldworks.
The Director in charge is a qualified accountant while the
other team members are university graduates with adequate
experience. The Internal Auditors have performed their work
with reference to the principles of the International Professional
Practice Framework of Institute of Internal Auditors. The AC will
review the engagement between the Group and the Internal
Auditors to ensure that the Internal Auditors’ objectivity and
independence are not impaired or affected.
 GOVERNANCE 53

Corporate Governance Overview Statement

PRINCIPLE C
INTEGRITY IN CORPORATE REPORTING AND MEANINGFUL
RELATIONSHIP WITH STAKEHOLDERS

I. COMMUNICATION WITH STAKEHOLDERS
Corporate disclosure and information is of utmost importance
for investors and shareholders. The Board is advised by
Management, the Company Secretaries and the External
and Internal Auditors on the contents and timing of disclosure
requirements of the MMLR on the financial results and various
announcements. The Board ensures that there is timely
release of quarterly financial results, circulars, Annual Reports,
corporate announcement and press releases. In addition
to the various announcements made, further information
of the Company is available on the Company’s website at
http://www.karex.com.my/.
Promoting sustainability is part of the corporate responsibilities
of the Group. The Board has reported its sustainability
initiatives undertaken by the Group on pages 16 to 29 of this
Annual Report.
The CEO also holds regular analyst briefings and investor
relations meetings as part of the Company’s investor relation
initiatives.
The Notice of AGM is circulated at least twenty eight (28)
days before the date of the meeting to provide shareholders
sufficient time to go through the Annual Report and papers
supporting the proposed resolutions.
Shareholders who are unable to attend are allowed to appoint
proxies to attend, participate, interact and vote on their behalf.
In view of the pandemic and movement control enforcement,
the upcoming AGM for the year 2020 will be held virtually.
This Corporate Governance Overview Statement is made in
accordance with a resolution of the Board dated 9 October 2020.

II. CONDUCT OF GENERAL MEETINGS

It has always been the Company’s practice to maintain

good relationship with its shareholders. Major corporate
developments and activities in the Company have always
been duly and promptly announced to all shareholders, in line
with Bursa Securities’ objectives of ensuring transparency and
good corporate governance practices.

The CEO presents the Company’s performance and major

activities carried out during the financial year under review in
each Annual General Meeting (“AGM”) to provide meaningful
information and encourage shareholders’ participation.
Shareholders have the opportunity to enquire and comment
on the Company’s performance and operations at the AGM.
The Board including the Chair of all respective Board
Committees, were in full attendance, addressed shareholders’
concerns alongside the CEO. Similar information is also
shared in press releases or press conferences, if held during
the year.

All the resolutions set out in the Notice of the Seventh AGM was
put to vote by poll and duly passed. The outcome of the AGM was
announced to Bursa Securities on the same day as the meeting.

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54 GOVERNANCE

Additional Compliance Information

The following information is provided in accordance with Paragraph 9.25 of the Main Market Listing Requirements (“MMLR”)
of Bursa Malaysia Securities Berhad as set out in Appendix 9C for the financial year ended 30 June 2020, unless otherwise
stated:

1. Utilisation of Proceeds
There were no proceeds raised from any corporate proposals during the financial year.

2. Audit and Non-Audit Fees

For the financial year ended 30 June 2020, the amount of audit and non-audit fees paid by the Company and the Group
to KPMG PLT and its affiliates are as follows:

Group Company
2020 2019 2020 2019
Fees paid to external auditors and its affiliates RM’000 RM’000 RM’000 RM’000
Audit fees 400 398 85 85
Non-audit fees 17 20 17 20

3. Material Contracts Involving the Interest of Directors, Chief Executive and Major Shareholders
There was no material contract entered into by the Group involving the interest of Directors, Chief Executive and Major
Shareholders, either subsisting as at the end of the current financial year or entered into since the end of the previous
financial period.

The Chief Executive Officer is the Chief Executive who oversees and is primarily responsible for the overall group
business operations.

4. Recurrent Related Party Transactions

The recurrent related party transaction of revenue nature incurred by the Group for the financial year did not exceed
the threshold prescribed under Paragraph 10.09(1) of the MMLR.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 GOVERNANCE 55

Audit Committee Report

The Board of Karex Berhad is pleased to present the Audit
Committee Report for the financial year ended 30 June 2020.
COMPOSITION AND MEETINGS
The Audit Committee (“AC”) comprises the following
members and details of their attendance at the five (5)
meetings held during the financial year ended 30 June 2020
are as follows:
TERMS OF REFERENCE (“TOR”)
The TOR of AC are published on the corporate website of
the Company at http://www.karex.com.my/ for shareholders’
reference pursuant to Paragraph 15.11 of MMLR. These
TOR were updated in accordance with the latest practices in
the Malaysian Code on Corporate Governance 2017 on the
provisions of the composition requirements of AC members
as well as the roles of AC Chairman and members.

SUMMARY OF WORK
Meeting
Name of Directors Attendance The work carried out by the AC during the financial year with
Chairman: Wong Yien Kim 5/5 respect to their responsibilities are summarised as follows:
[Independent
Ensuring Financial Statements Comply with Applicable
Non-Executive Director]
Financial Reporting Standards:
Members: Tun Dato’ Seri Arshad Ayub 5/5
[Independent (a) Reviewed the financial positions, unaudited quarterly interim
Non-Executive Director] financial reports and announcements for the respective financial
quarters prior to submission to the Board for consideration and
Dato’ Dr Ong Eng Long 5/5 approval. The review is to ensure that the Group’s unaudited
@ Ong Siew Chuan quarterly financial reporting and disclosures present a true
[Senior Independent and fair view of the Group’s financial position and performance
Non-Executive Director] and are in compliance with the approved Malaysian Financial
Reporting Standard and disclosure provision of the MMLR; and
Professor Dato’ Dr. Adeeba 5/5
binti Kamarulzaman (b) Reviewed the audited financial statements for the financial year
[Independent ended 30 June 2019 and discussed with the Management and
Non-Executive Director] External Auditors on the accounting principles and standards
that were applied in the annual audited financial statements.
Law Ngee Song 5/5 As part of this review, the AC also considered the integrity of
[Independent information in the financial statements focusing particularly on:
Non-Executive Director]
• significant adjustments resulting from the audit, going
The AC Chairman, Wong Yien Kim, is a fellow member of concern assumption, completeness of disclosures
the Malaysian Institute of Accountants and the Institute of and compliance with accounting standards;
Chartered Accountants England and Wales. Accordingly,
the Company complies with Paragraph 15.09(1)(c)(i) of • changes in and implementations of major accounting
the Main Market Listing Requirements (“MMLR”) of Bursa policies and practices to the Group, if any;
Malaysia Securities Berhad (“Bursa Securities”).
• significant matters and unusual events or
During the financial year, the Nomination Committee has transactions highlighted by the External Auditors;
reviewed the performance and effectiveness of the AC based and
on the criteria as stated in Corporate Governance Overview
• how these significant matters were addressed
Statement and reported that the AC and its members have
including the judgement of those involved and
discharged their functions, duties and responsibilities in
reservations, if any arising from the audit.
accordance with its Terms of Reference.
Reviewing the Audit Findings of the External Auditors and
Further details of each AC member are listed under the
Assessing their Performance Suitability and Independence:
Profile of Directors as set out on pages 30 to 39 of this
Annual Report. (a) Reviewed the audit plan of the External Auditors covering
their scope of audit, methodology and timetable, audit
materiality, and areas of focus prior to the commencement
of their annual audit;

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56 GOVERNANCE
Audit Committee Report
(b) Assessed and discussed the External Auditors’ audit status
report covering the key audit matters, audit findings and
recommendations relating to internal control deficiencies;
(c) Met the External Auditors without the presence of
executive Board Members and Management to further
discuss matters arising from audit and assessed the
co-operation and assistance given by Management to
the External Auditors; and
(d) Reviewed the fees and expenses paid to the External
Auditors, including fees paid for non-audit services during
the year and assessed the independence of the External
Auditors for the re-appointment as External Auditors.
The AC is of the opinion that the independence of the
External Auditors has not been compromised based on the
independent confirmation provided by the External Auditors.
Reviewing the Audit Findings of the Internal Auditors and Assisting
the Board in Reviewing the Effectiveness and Adequacy of
Systems of Internal Control in the Key Operation Processes:
(a) Discussed with the Internal Auditors on the progress and
coverage of the audit plan in its quarterly meetings to ensure
that the audit scope remains relevant taking into consideration
changes in the Group’s operating environment;
(b) Reviewed and discussed with the Internal Auditors, their
audit findings, recommendations made, Management’s
responses to the audit findings and proposed action plans,
including those issues arising during the course of audit (in
the absence of Management where necessary);
(c) Reviewed the effectiveness and efficiency of the
internal controls system in place and the risk factors
affecting the Group as well as the action plans taken by
Management to resolve the issues to ensure adequacy
of the internal controls system;
(d) Reviewed and established frameworks to address past
internal audit findings, whilst further strengthening the
Group’s internal processes; and
(e) Assessed the adequacy of the scope, independence,
competency and cost of the Internal Audit function to
ensure efficient and effective functionality of the Internal
Auditors.
Overseeing Governance Practices in the Group:
(a) Reviewed the Corporate Governance Statement, AC
Report and Statement on Risk Management and Internal
Control before recommending them to the Board for
approval and inclusion in the Annual Report; and
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
(b) Monitored the Group’s involvement in related party
transactions and ensured that these transactions were
performed at arm’s length basis, on normal commercial
terms, and were not detrimental to the interests of
minority shareholders.
INTERNAL AUDIT FUNCTIONS
The Group’s Internal Audit function was outsourced to Moore
Stephens Associates PLT, a chartered accounting firm. The
outsourced Internal Auditors report directly to AC and assist
the Board via the AC in providing an independent assessment
of the adequacy, efficiency and effectiveness of the Group’s
risk management and internal control systems.
The Internal Auditors have performed their work in accordance
with the principles of the international professional practice
framework on internal auditing covering the conduct of audit
planning, execution, documentation, communication of findings
and consultation with key stakeholders on the audit concerns.
In order to ensure that the audit focuses on relevant and
appropriate risk areas, an internal audit plan was developed
in consultation with Management, taking into consideration the
Group’s structure, concerns and the challenges faced. A new
internal audit plan will be proposed and presented to the AC
when appropriate for deliberation and approval before internal
audit reviews are carried out.
The summary of work conducted and reported by the Internal
Auditors to the AC during the AC’s quarterly meetings in the
current financial year are as follows:
(i) Evaluated the effectiveness and compliance of general
controls underpinning information technology;
(ii) Assessed the effectiveness and control procedures of
corporate strategy, sales and marketing, and regulatory
affairs;
(iii) Assessed the effectiveness and control procedures of
production operation, quality assurance, health, safety and
environment of a major subsidiary; and
(iv) Conducted follow-up audits in every quarter with
Management to ensure implementations of the agreed
audit recommendations.
The fee for Internal Audit function of the Group for the financial
year ended 30 June 2020 was RM90,000.
This report is made in accordance with the resolution of the
Board dated 9 October 2020.
 GOVERNANCE 57

Directors’ Responsibility Statement

The Directors of Karex Berhad (“the Company”) are required to prepare financial statements for each financial year which have
been made in accordance with the applicable financial reporting standards and the requirements of the Companies Act 2016 in
Malaysia so as to give a true and fair view of the state affairs of the Company and of the Group at the end of the financial year and
of their results and cash flows for that financial year.

In preparing the financial statements of the Company and of the Group for the financial year ended 30 June 2020, the Directors of
the Company have:

• Adopted suitable accounting policies and applied them consistently;

• Made judgements and estimates that are reasonable and prudent;
• Ensured that applicable financial reporting standards have been followed; and
• Prepared the financial statements on a going concern basis as the Directors have a reasonable expectation, upon making
enquiries, that the Company and the Group have adequate resources to continue in operational existence for the foreseeable
future.

The Directors are responsible to ensure that the Company and the Group maintain proper accounting records that disclose their
financial positions with reasonable accuracy, in compliance with the Companies Act 2016.

The Directors are also responsible for taking such steps which are reasonably open to them to safeguard the assets of the Group
and to prevent and detect fraudulent and irregular activities.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

58 GOVERNANCE

Statement on Risk Management and

Internal Control
The Board of Directors (“the Board’)
is pleased to present its Statement
on Risk Management and Internal
Control for the financial year ended
30 June 2020. This Statement is
prepared pursuant to
15.26(b) and Practice Note 9 of the
Main Market Listing Requirements
(“MMLR”) and is guided
“Statement on Risk Management
and Internal Control – Guidelines
for Directors of Listed Issuers” (“the
Guideline”) endorsed
Malaysia Securities Berhad (“Bursa
Securities”).
BOARD’S RESPONSIBILITY
Committed towards the maintenance
of a sound internal control system and
effective risk management structure,
the Board sets appropriate policies
on internal control and constantly
seeks assurance of the adequacy and
effectiveness of them. These policies
and guidelines comply with applicable
laws and rules of risk management,
including the Malaysian
Corporate Governance.
The Board is also responsible for
setting business direction
in overseeing the conduct of the
Group’s operations, besides building
a stronger foundation
control to effectively manage and
mitigate risks faced by the Group. This
solid foundation of internal controls
has been ingrained into the Group’s
corporate culture as a mechanism to
safeguard shareholders’ investments
and the Group’s assets.
RISK MANAGEMENT AND INTERNAL CONTROLS
As Karex’s endeavour to continuously strive for high standards of corporate
governance practices, the Board has established a Risk Management Committee
(“RMC”), specifically to perform risk assessment, which relates to identifying and
paragraph analysing the risks which could potentially affect the Group. This Committee is
further assisted by the Group’s Senior Management personnel, who collectively
form the Risk Management Working Committee (“RMWC”).
by the
Composition of RMC:
Chairwoman: Lam Jiuan Jiuan
[Non-Independent Non-Executive Director]
by Bursa
Members: Dato’ Dr. Ong Eng Long @ Ong Siew Chuan
[Senior Independent Non-Executive Director]
Professor Dato’ Dr. Adeeba binti Kamarulzaman
[Independent Non-Executive Director]
Goh Miah Kiat
[Executive Director
Chief Executive Officer]
Goh Chok Siang
[Chief Financial Officer]
RISK MANAGEMENT
The RMWC carries the responsibility of identifying, evaluating, monitoring and
managing key risk areas which could potentially affect the achievement of the
Group’s business objectives and strategies. Identification of risk appetite which
Code of
commensurates with the structure, risk profile, complexity, activities and size of
the Group is also performed by the RMWC, which is subsequently presented to
the RMC for approval.
and
The RMC then continues to assess the key risks, controls and action plans
identified to mitigate and manage the Group’s risk exposure in efforts to further
strengthen the Group’s existing risk management framework. Major risks
of internal
identified, together with their proposed action plans are then presented to the
Board.

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 GOVERNANCE 59

Statement on Risk Management and Internal Control

Throughout the financial year in review, two (2) meetings were conducted by the RMC, which revolved around the analysis
of emerging and existing strategic risks faced by the Group and the establishment of solid mitigation plans in managing the
identified risks. Key matters raised during the meetings are as follows:

Key Risk Focus Key Mitigation Plan

Information • The Group’s IT system is constantly being revised and upgraded in order to ensure that
Technology (“IT”) potential risks are detected and remediated efficiently at all times.
Risk • Secured company information and data is backed-up and safeguarded on offsite servers.
• IT personnel are constantly providing Group employees updates regarding the latest scams
and malware to ensure that users are kept informed about potential threats and scams.
Labour Dependency • Increased implementation of automation in production processes to reduce the overall Group
headcount that is expected to result in cost savings as well as improved quality consistency.
• The recruitment of foreign labour has been suspended until the Group can be assured that
recruitment practices are handled ethically and according to United Nations (“UN”) standards
and requirements.
• An operational dashboard has been developed and implemented to optimise staffing and
headcount throughout the Group’s facilities.
Management • Human resource recruitment is aimed at attracting and hiring new employees that will be
Succession able to contribute value and alternative perspectives to the Group.
• Talent development program is organised annually to motivate and equip employees with the
skills to eventually ascend to key management positions.
Supply Chain • Suppliers of raw materials and manufacturing inputs are constantly reviewed in order to
ensure the Group is able to derive competitive costing.
• The Group maintains a diversified range of suppliers and has formulated a contingency plan
in order to minimise the effect of potential disruptions from supplier downtimes.
• Requirement for suppliers to confirm compliance with prevailing UN standards and
requirements so that international customers are in turn not affected by undue allegations.
• Enrolled as a member of the Fair Rubber International to ensure that all rubber utilised within
the Group is sourced ethically and responsibly.
Crisis Management • Individual operations and management teams were briefed about how to take more
pro-active measures to identify and mitigate risks within their business units in order to more
effectively anticipate potential events of crisis.
• A Crisis Management team was set up and structured to more adequately equip the Group
to respond to catastrophic events.
Foreign Exchange • Foreign currency exposure is mitigated through continuous monitoring and utilising of forward
Risk exchange contracts.
• The conversion of foreign currency or purchase of derivatives is selected on a merit basis
after procuring competitive quotations from multiple banks.
Health and Safety • Increased efforts in promoting safety awareness/culture at all levels through additional safety
Risk briefings, hazardous warnings and provision of the necessary personal protective gears.
• As a result of the pandemic, additional preventive measures were implemented as follow:
o Restriction of site visits from external parties to all plants and offices;
o Enforcement of travel restriction to discourage employees to travel overseas;
o Screening of employees prior to entering all premises; and
o Providing employees with hand sanitizers, masks etc.
Production Cost • Implementation of Operational Dashboard to continuously monitor and optimise production
Optimisation and cost efficiency, and at the same time, to identify the best practices proven by results to
be replicated in all plants.

On the operational level, risk management remains a primary matter discussed in management meetings between the
RMWC and Head of Departments (“HODs”). Involved in the daily affairs of the Group, these HODs are then required to
monitor and implement action plans, while enforcing internal controls to manage the potential risks.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

60 GOVERNANCE
Statement on Risk Management and Internal Control
INTERNAL CONTROLS
The key subsidiaries of the Group continue to be certified
under the ISO 13485:2016 Quality Management System and
the ISO 14001:2015 Environmental Management System.
These management systems form the fundamentals
of the operational procedures in ensuring consistency
in production processes. Internal quality audits and
independent surveillance audits are also being conducted
by external certificated bodies to ensure compliance of
the Group towards each certification requirements. In
addition, the Group continues to be certified and licensed
by regulators from various countries.
Other key elements relating to the internal control system of
the Group are as follows:
• The Group’s organisation chart
responsibilities, accountability and
structure of reporting lines;
• The structure establishes a clear reporting line for
approval and authority of the Board, Chief Executive
Officer (“CEO”), Senior Management and HODs for the
transactions undertaken in the Group;
• As a precautionary step, risks faced by the Group
have been insured to minimise financial exposure
and losses. They include burglary, fire, stocks, money,
fidelity guarantee, product liability and staff health and
safety;
• Financial performance is reviewed by Executive
Directors and CEO;
• Written policies and procedures on key processes of
the Group are constantly being reviewed and enhanced
to ensure its adequacy;
• Ongoing monthly management reporting procedures are
executed to monitor and track the Group’s performance;
and
• Internal Auditors conduct testing of the effectiveness
and adequacy of internal control procedures and
processes.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
BOARD REVIEW MECHANISM
The Audit Committee (“AC”) is entrusted by the Board with
the responsibility of ensuring the objectivity of internal
control system within the Group. In order to enhance the
effectiveness of risk management and internal control
systems, the AC is assisted by the Internal Auditors,
a body independent of the Group’s activities and operations,
to assess the adequacy and effectiveness of control of the
selected key functions on a quarterly basis. The Group’s
External Auditors have also provided the AC with their
professional views and feedback on the risk and control
issues identified during the course of their statutory audit.
Areas for improvement identified by both Internal and
External Auditors throughout the financial year in review
have been deliberated by the Board and AC to maintain
outlines the the integrity of internal controls. None of the reported
hierarchical control weaknesses have resulted in any material loss,
contingencies or uncertainties that would require mention in
the Company’s Annual Report. While the Group takes pride
in its current comprehensive internal control framework,
the Management Team continuously strives to further
strengthen and enhance internal controls with assistance
from both internal and external parties.
In addition, Management supplements the AC review on
control and understanding of risk issues when presenting
their quarterly financial performance and results. Together
with the Group’s business development and the performance
of its subsidiaries, the financial performance of the Group
is then reviewed and thereafter recommended to the Board
for approval before subsequently being publicly announced.
The Board has also defined the Code of Ethics for the Group
and established a whistleblowing channel for reporting
of violations against this code. Under this establishment,
employees and stakeholders who know of or suspect any
forms of violation are encouraged to report the incident.

Statement on Risk Management and Internal Control
MANAGEMENT RESPONSIBILITIES AND
ASSURANCE
In accordance to the Guideline, Management is responsible
to the Board for:
• Identifying risks relating to the Group’s objectives and
strategies;
• Designing, implementing and monitoring the risk
management framework in accordance with the Group’s
strategic vision and overall risk appetite; and
• Identifying changes to risks or emerging risks,
responding appropriately and promptly bringing these
to the attention of the Board.
The Board has received assurance and affirmation from
the CEO and Chief Financial Officer to the best of their
knowledge that the Group’s risk management and internal
control systems are operating adequately and effectively in
all material aspects.
BOARD ASSURANCE AND LIMITATION
The Board confirms that the process for identifying,
evaluating and managing significant risks in the Group is
on-going. For the financial year under review, there was
no material loss which resulted from significant control
weaknesses. The Board is satisfied that the existing levels
of risk management and internal controls are adequate
and effective in enabling the Group to achieve its business
objectives and operational efficiency and effectiveness.
The Board is of the view that the risk management and
internal control systems in place for the year under review
are adequate and effective in safeguarding the shareholders’
investment, the interest of customers, regulators and
employees, and the Group assets.
GOVERNANCE 61
While the Board wishes to reiterate that risk management
and systems of internal control are being continuously
improved in line with evolving business developments,
it should be noted that the risk management systems and
systems of internal control cannot fully eliminate all risks
of failure to achieve business objectives. Therefore, these
systems of internal control and risk management in the
Group are only able to provide reasonable but not absolute
assurance against material misstatements, frauds and
losses.
REVIEW OF STATEMENT ON RISK MANAGEMENT
AND INTERNAL CONTROL BY EXTERNAL
AUDITORS
The External Auditors have reviewed this Statement on Risk
Management and Internal Control pursuant to the scope
set out in Audit and Assurance Practice Guide (“AAPG”)
3, (previously Recommended Practice Guide 5 (Revised
2015)), Guidance for Auditors on Engagements to Report
on the Statement on Risk Management and Internal Control
included in the Annual Report issued by the Malaysian
Institute of Accountants for inclusion in the Annual Report
of the Group for the year ended 30 June 2020, and reported
to the Board that nothing has come to their attention that
cause them to believe that the statement intended to be
included in the Annual Report of the Group, in all material
respects:
(a) Has not been prepared in accordance with the
disclosures required by paragraphs 41 and 42 of the
Statement on Risk Management and Internal Control:
Guidelines for Directors of Listed Issuers, or
(b) Is factually inaccurate.
AAPG 3 does not require the External Auditors to consider
whether the Directors’ Statement on Risk Management and
Internal Control covers all risks and controls, or to form an
opinion on the adequacy and effectiveness of the Group’s
risk management and internal control system including
the assessment and opinion by the Board of Directors and
Management thereon. The External Auditors are also not
required to consider whether the processes described to
deal with material internal control aspects of any significant
problems disclosed in the Annual Report will, in fact, remedy
the problems.
Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
62 FINANCIAL STATEMENTS

FINANCIAL
STATEMENTS
63 // Directors’ Report
68 // Statements of Financial Position
69 // Statements of Profit or Loss
70 // Statements of Profit or Loss and Other
Comprehensive Income
71 // Consolidated Statement of Changes in Equity
73 // Statement of Changes in Equity
74 // Statements of Cash Flows
77 // Notes to the Financial Statements
136 // Statement by Directors
137 // Statutory Declaration
138 // Independent Auditors’ Report

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 63

Directors’ Report
for the year ended 30 June 2020

The Directors have pleasure in presenting their report and the audited financial statements of the Group and of the Company
for the financial year ended 30 June 2020.

PRINCIPAL ACTIVITIES

The principal activity of the Company consists of investment holding. The principal activities of the subsidiaries are disclosed
in Note 5 to the financial statements. There has been no significant change in the nature of these activities during the financial
year.

SUBSIDIARIES

The details of the Company’s subsidiaries are disclosed in Note 5 to the financial statements.

RESULTS
Group Company
RM’000 RM’000
Profit for the year attributable to:
Owners of the Company 228 5,819
Non-controlling interests 3,260 -
3,488 5,819

RESERVES AND PROVISIONS

There were no material transfers to or from reserves and provisions during the financial year under review except as disclosed
in the statements of changes in equity.

DIVIDENDS

Since the end of the previous financial year, the amount of dividends paid by the Company were as follows:

i) In respect of the financial year ended 30 June 2019:

• a final single-tier dividend of 1.0 sen per ordinary share totalling RM10,023,750 declared on 11 October 2019 and
paid on 23 December 2019.

ii) In respect of the financial year ended 30 June 2020:

• a interim dividend of 0.5 sen per ordinary share totalling RM5,011,875 declared on 25 February 2020 and paid on
25 March 2020.

The Directors proposed a final single-tier dividend of 0.5 sen per ordinary share totalling RM5,011,875 in respect of the year
ended 30 June 2020 subject to the approval of the shareholders at the forthcoming Annual General Meeting. These financial
statements do not reflect this proposed final single-tier dividend, which will be accounted for in the shareholders’ equity as an
appropriation of retained earnings in the financial year ending 30 June 2021.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

64 FINANCIAL STATEMENTS

Directors’ Report
for the year ended 30 June 2020

DIRECTORS OF THE COMPANY

Directors who served during the financial year until the date of this report are:

Tun Dato’ Seri Arshad Ayub

Dato’ Dr. Ong Eng Long @ Ong Siew Chuan
Professor Dato’ Dr. Adeeba binti Kamarulzaman
Mr. Wong Yien Kim
Mr. Law Ngee Song
Ms. Lam Jiuan Jiuan
Ms. Goh Yen Yen
Mr. Goh Leng Kian
Mr. Goh Miah Kiat (appointed on 25 February 2020)

The names of the Directors of subsidiaries are set out in the respective subsidiaries’ financial statements and the said
information is deemed incorporated herein by such reference and made a part hereof.

DIRECTORS’ INTERESTS IN SHARES

The interests and deemed interests in the shares of the Company and of its related corporations (other than wholly-owned subsidiaries)
of those who were Directors at financial year end (including the interests of the spouses or children of the Directors who themselves are
not Directors of the Company) as recorded in the Register of Directors’ Shareholdings and Members are as follows:

Number of ordinary shares

At At
Name of Directors Interest 1 July 2019 Bought Sold 30 June 2020
Company
Directors of the Company
Tun Dato’ Seri Arshad Ayub Direct 14,870,000 230,000 - 15,100,000
Deemed (1)
4,460,000 740,000 - 5,200,000
Dato’ Dr. Ong Eng Long @
Ong Siew Chuan Direct 710,000 150,000 - 860,000
Mr. Law Ngee Song Direct 258,750 - - 258,750
Ms. Lam Jiuan Jiuan Direct 19,087,456 - - 19,087,456
Deemed (2)
64,312,456 - - 64,312,456
Deemed (3)
197,075,000 1,014,600 - 198,089,600
Ms. Goh Yen Yen Direct 71,562,456 500,000 - 72,062,456
Mr. Goh Leng Kian Direct 40,468,865 900,000 - 41,368,865
Deemed (4)
184,250,000 - - 184,250,000
Deemed (2)
573,750 - - 573,750
Mr. Goh Miah Kiat Direct 31,061,097 16,089,000 - 47,150,097
Deemed (4)
184,250,000 - - 184,250,000

(1)
Deemed interested by virtue of his equity interest in Zalaraz Sdn. Bhd. pursuant to Section 8 of the Companies Act 2016.
(2)
Deemed interested by virtue of his/her equity interest held by his/her spouse pursuant to Section 59 (11)(c) of the Companies Act 2016.
(3)
Deemed interested by virtue of her equity interest in AJNA Holdings Limited, Maharani Limited and Karex One Limited pursuant to
Section 8 of the Companies Act 2016.
(4)
Deemed interested by virtue of his equity interest in Karex One Limited pursuant to Section 8 of the Companies Act 2016.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 65

Directors’ Report
for the year ended 30 June 2020

DIRECTORS’ INTERESTS IN SHARES (CONTINUED)

By virtue of their substantial interests in the shares of the Company, Ms. Lam Jiuan Jiuan, Ms. Goh Yen Yen, Mr. Goh Leng Kian
and Mr. Goh Miah Kiat are also deemed interested in the ordinary shares of the wholly-owned subsidiaries during the
financial year to the extent that Karex Berhad has an interest.

The other Directors holding office at 30 June 2020 do not have any interest in the ordinary shares of the Company and of its
related corporations during the financial year.

DIRECTORS’ BENEFITS

Since the end of the previous financial year, no Director of the Company has received nor become entitled to receive any
benefit (other than those fees and other benefits included in the aggregate amount of remuneration received or due and
receivable by Directors as shown in the financial statements or the fixed salary of a full time employee of the Company or of
related corporations) by reason of a contract made by the Company or a related corporation with the Director or with a firm
of which the Director is a member, or with a company in which the Director has a substantial financial interest other than
certain Directors who have significant financial interest in companies which traded with certain companies in the Group in the
ordinary course of business as disclosed in Note 28 to the financial statements.

There were no arrangements during and at the end of the financial year which had the object of enabling Directors of the
Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body
corporate.

ISSUE OF SHARES AND DEBENTURES

There were no changes in the issued and paid-up capital of the Company during the financial year.

There were no debentures issued during the financial year.

OPTIONS GRANTED OVER UNISSUED SHARES

No options were granted to any person to take up unissued shares of the Company during the financial year.

INDEMNITY AND INSURANCE COSTS

During the financial year, the total amount of premium paid for insurance effected for Directors and officers of the Group and
of the Company was RM26,000 for a total sum insured of RM10 million.

There were no indemnity given to, or insurance effected for auditors of the Company during the financial year.

QUALIFICATION OF SUBSIDIARIES’ FINANCIAL STATEMENTS

The auditors’ report on the audited financial statements of Company’s subsidiaries did not contain any qualification or any
adverse comments.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

66 FINANCIAL STATEMENTS

Directors’ Report
for the year ended 30 June 2020

OTHER STATUTORY INFORMATION

Before the financial statements of the Group and of the Company were made out, the Directors took reasonable steps to
ascertain that:

i) all known bad debts have been written off and adequate provision has been made for doubtful debts, and

ii) any current assets which were unlikely to be realised in the ordinary course of business have been written down to an
amount which they might be expected so to realise.

At the date of this report, the Directors are not aware of any circumstances:

i) that would render the amount written off for bad debts or the amount of the provision for doubtful debts in the Group and
in the Company inadequate to any substantial extent, or

ii) that would render the value attributed to the current assets in the financial statements of the Group and of the Company
misleading, or

iii) which have arisen which render adherence to the existing method of valuation of assets or liabilities of the Group and
of the Company misleading or inappropriate, or

iv) not otherwise dealt with in this report or the financial statements that would render any amount stated in the financial
statements of the Group and of the Company misleading.

At the date of this report, there does not exist:

i) any charge on the assets of the Group or of the Company that has arisen since the end of the financial year and which
secures the liabilities of any other person, or

ii) any contingent liability in respect of the Group or of the Company that has arisen since the end of the financial year.

No contingent liability or other liability of any company in the Group has become enforceable, or is likely to become
enforceable within the period of twelve months after the end of the financial year which, in the opinion of the Directors, will
or may substantially affect the ability of the Group and of the Company to meet their obligations as and when they fall due.

In the opinion of the Directors, the financial performance of the Group and of the Company for the financial year ended
30 June 2020 have not been substantially affected by any item, transaction or event of a material and unusual nature nor has
any such item, transaction or event occurred in the interval between the end of that financial year and the date of this report.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 67

Directors’ Report
for the year ended 30 June 2020

AUDITORS

The auditors, KPMG PLT, have indicated their willingness to accept re-appointment.

The auditors’ remuneration is disclosed in Note 20 to the financial statements.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Goh Leng Kian

Director

Goh Miah Kiat

Director

Date: 9 October 2020

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

68 FINANCIAL STATEMENTS

Statements of Financial Position

As at 30 June 2020

Group Company
2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000
Assets
Property, plant and equipment 3 218,872 220,735 - -
Right-of-use assets 4 30,125 - - -
Investments in subsidiaries 5 - - 283,675 283,675
Intangible assets 6 97,525 96,562 - -
Deferred tax assets 7 1,725 1,914 - -
Total non-current assets 348,247 319,211 283,675 283,675

Inventories 8 128,884 119,628 - -

Trade and other receivables 9 95,377 82,285 59,122 56,894
Contract assets 10 316 500 - -
Current tax assets 2,378 9,837 - -
Cash and cash equivalents 11 46,341 63,635 10,763 23,224
273,296 275,885 69,885 80,118
Assets classified as held for sale 12 281 - - -
Total current assets 273,577 275,885 69,885 80,118
Total assets 621,824 595,096 353,560 363,793

Equity
Share capital 13 281,980 281,980 281,980 281,980
Reserves 13 198,169 209,052 70,316 79,533
Equity attributable to owners
of the Company 480,149 491,032 352,296 361,513
Non-controlling interest 4,951 1,576 - -
Total equity 485,100 492,608 352,296 361,513

Liabilities
Loans and borrowings 14 4,946 9,056 - 828
Lease liabilities 17,579 - - -
Deferred tax liabilities 7 7,239 8,064 - -
Total non-current liabilities 29,764 17,120 - 828

Loans and borrowings 14 26,696 24,612 857 1,157

Lease liabilities 3,296 - - -
Trade and other payables 15 76,305 60,339 323 184
Derivative financial liabilities 16 361 3 - -
Current tax liabilities 302 414 84 111
Total current liabilities 106,960 85,368 1,264 1,452
Total liabilities 136,724 102,488 1,264 2,280
Total equity and liabilities 621,824 595,096 353,560 363,793

The accompanying notes form an integral part of the financial statements.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
 FINANCIAL STATEMENTS 69

Statements of Profit or Loss

For the year ended 30 June 2020

Group Company
2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000
Revenue 17 395,067 378,484 5,000 6,500
Cost of sales (307,364) (289,296) - -
Gross profit 87,703 89,188 5,000 6,500
Other income 3,710 2,067 337 35
Distribution expenses (34,301) (36,590) - -
Administrative expenses (49,866) (49,315) (1,751) (1,438)
Other expenses (81) (1,140) (23) -
Results from operating activities 7,165 4,210 3,563 5,097

Finance income 517 1,018 2,657 3,730

Finance costs 18 (2,490) (1,424) (51) (117)
Net finance (costs)/income (1,973) (406) 2,606 3,613

Profit before tax 5,192 3,804 6,169 8,710

Tax expense 19 (1,704) (747) (350) (466)
Profit for the year 20 3,488 3,057 5,819 8,244

Profit attributable to:

Owners of the Company 228 2,533 5,819 8,244
Non-controlling interest 3,260 524 - -
Profit for the year 3,488 3,057 5,819 8,244

Basic and diluted earnings

per ordinary share (sen) 21 0.02 0.25

The accompanying notes form an integral part of the financial statements.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
70 FINANCIAL STATEMENTS

Statements of Profit or Loss and Other

Comprehensive Income
For the year ended 30 June 2020
Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Profit for the year 3,488 3,057 5,819 8,244

Other comprehensive income, net of tax

Items that are or may be reclassified
subsequently to profit or loss
Foreign currency translation differences
for foreign operations 4,040 10,393 - -
Total comprehensive income for the year 7,528 13,450 5,819 8,244

Total comprehensive income attributable to:

Owners of the Company 4,153 12,904 5,819 8,244
Non-controlling interest 3,375 546 - -
Total comprehensive income for the year 7,528 13,450 5,819 8,244

The accompanying notes form an integral part of the financial statements.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
 FINANCIAL STATEMENTS 71

Consolidated Statement
of Changes in Equity
For the year ended 30 June 2020
Attributable to owners of the Company
Non-distributable Distributable
Non-
Share Merger Translation Other Retained controlling Total
capital reserve reserve reserve earnings Total interest equity
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
At 1 July 2018 281,980 63,511 3,653 718 133,278 483,140 1,030 484,170
Foreign currency
translation differences
for foreign operations/
Total other
comprehensive
income for the year - - 10,371 - - 10,371 22 10,393
Profit for the year - - - - 2,533 2,533 524 3,057
Total comprehensive
income for the year - - 10,371 - 2,533 12,904 546 13,450

Contributions by and
distributions to owners
of the Company
Dividends to owners
of the Company/
Total transactions
with owners of the
Company 22 - - - - (5,012) (5,012) - (5,012)
At 30 June 2019 281,980 63,511 14,024 718 130,799 491,032 1,576 492,608

The accompanying notes form an integral part of the financial statements.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
72 FINANCIAL STATEMENTS

Consolidated Statement of Changes in Equity

for the year ended 30 June 2020

Attributable to owners of the Company

Non-distributable Distributable
Non-
Share Merger Translation Other Retained controlling Total
capital reserve reserve reserve earnings Total interest equity
Note RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
At 1 July 2019 281,980 63,511 14,024 718 130,799 491,032 1,576 492,608
Foreign currency
translation differences
for foreign operations/
Total other
comprehensive
income for the year - - 3,925 - - 3,925 115 4,040
Profit for the year - - - - 228 228 3,260 3,488
Total comprehensive
income for the year - - 3,925 - 228 4,153 3,375 7,528

Contributions by and
distributions to owners
of the Company
Dividends to owners
of the Company/
Total transactions
with owners of the
Company 22 - - - - (15,036) (15,036) - (15,036)
At 30 June 2020 281,980 63,511 17,949 718 115,991 480,149 4,951 485,100

The accompanying notes form an integral part of the financial statements.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
 FINANCIAL STATEMENTS 73

Statement of Changes in Equity

For the year ended 30 June 2020

Attributable to owners of the Company

Non-distributable Distributable
Share Merger Retained Total
capital reserve earnings equity
Note RM’000 RM’000 RM’000 RM’000
Company
At 1 July 2018 281,980 63,511 12,790 358,281
Profit and total comprehensive income
for the year - - 8,244 8,244

Contributions by and distributions

to owners of the Company
Dividends to owners of the Company/
Total transactions with owners of the
Company 22 - - (5,012) (5,012)
At 30 June 2019/1 July 2019 281,980 63,511 16,022 361,513
Profit and total comprehensive income
for the year - - 5,819 5,819

Contributions by and distributions

to owners of the Company
Dividends to owners of the Company/
Total transactions with owners of the
Company 22 - - (15,036) (15,036)
At 30 June 2020 281,980 63,511 6,805 352,296

The accompanying notes form an integral part of the financial statements.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
74 FINANCIAL STATEMENTS

Statements of Cash Flows

For the year ended 30 June 2020

Group Company
2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000
Cash flows from operating activities
Profit before tax 5,192 3,804 6,169 8,710

Adjustments for:
Depreciation and amortisation:
- Property, plant and equipment 16,699 15,530 - -
- Right-of-use assets 3,924 - - -
- Intangible assets 202 123 - -

Dividend income - - (5,000) (6,500)

Fair value loss on derivative instruments 361 3 - -
Finance costs 18 2,490 1,424 51 117
Finance income (517) (1,018) (2,657) (3,730)
Impairment loss/(Reversal of impairment
loss) on trade receivables 46 (88) - -

Inventories:
- Allowance for/(Reversal of) slow moving 2,233 (5) - -
- Written off 106 104 - -
- Written down to net realisable value 975 818 - -

Property, plant and equipment:

- Gain on disposal (23) (217) - -
- Written off 81 157 - -
Operating profit/(loss) before changes
in working capital 31,769 20,635 (1,437) (1,403)
Change in inventories (12,570) 1,755 - -
Change in trade and other receivables (13,765) 16,386 (2,228) (4,879)
Change in contract assets 184 (500) - -
Change in trade and other payables 17,398 (2,130) 139 54
Cash generated from/(used in) operations 23,016 36,146 (3,526) (6,228)

Tax refunded/(paid) 5,007 (3,871) (377) (465)

Net cash from/(used in)
operating activities 28,023 32,275 (3,903) (6,693)

The accompanying notes form an integral part of the financial statements.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
 FINANCIAL STATEMENTS 75

Statements of Cash Flows

for the year ended 30 June 2020

Group Company
2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000
Cash flows from investing activities
Acquisition of:
- property, plant and equipment 23 (24,186) (18,244) - -
- intangible assets 6 (26) (802) - -

Increase in investment in subsidiaries - - - (3,810)

Proceeds from disposal of property,
plant and equipment 1,182 2,035 - -
Dividend received - - 5,000 6,500
Interest received 517 1,018 2,657 3,730
Net cash (used in)/from investing
activities (22,513) (15,993) 7,657 6,420

Cash flows from financing activities

Interest paid (2,490) (1,619) (51) (117)
Change in pledged deposits 68 (334) - -
Dividends paid to owners of the Company 22 (15,036) (5,012) (15,036) (5,012)

Repayments of:
- hire purchase liabilities (377) - - -
- finance lease liabilities - (677) - -
- lease liabilities (3,033) - - -
- term loans (4,122) (2,366) (1,128) (1,084)
- export financing - (1,372) - -
- revolving credits (1,428) (56) - -
- foreign currency trade loan (352) - - -

Drawdown of:
- bankers’ acceptances 2,144 6,555 - -
- export financing 1,600 - - -
- foreign currency trade loan - 352 - -
- term loans - 3,857 - -
- trust receipt 330 61 - -
Net cash used in financing activities (22,696) (611) (16,215) (6,213)

Effect of exchange rate fluctuations

on cash held (40) 238 - -
Net (decrease)/increase in cash
and cash equivalents (17,226) 15,909 (12,461) (6,486)
Cash and cash equivalents at 1 July 62,243 46,334 23,224 29,710
Cash and cash equivalents at 30 June 11 45,017 62,243 10,763 23,224

The accompanying notes form an integral part of the financial statements.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))
76 FINANCIAL STATEMENTS

Statements of Cash Flows

for the year ended 30 June 2020

Cash outflows for leases as a lessee

Group
2020 2019
Note RM’000 RM’000
Included in net cash from operating activities
Payment relating to short-term leases 20 2,118 -
Payment relating to leases of low-value assets 20 71 -

Included in net cash from financing activities

Payment of lease liabilities 3,033 -
Interest paid in relation to lease liabilities 18 1,007 -
Total cash outflows for leases 6,229 -

Reconciliation of movement of liabilities to cash flows arising from financing activities

Acquisition
Net of new Adjustment Net Acquisition
changes finance on initial changes of new hire
At from lease At application At from Acquisition purchase At
1 July financing liabilities 30 June of 1 July financing of new liabilities 30 June
2018 cash flows (Note 23) 2019 MFRS 16 2019 cash flows leases (Note 23) 2020
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Trust receipt 414 61 - 475 - 475 330 - - 805
Bankers’ acceptances 6,975 6,555 - 13,530 - 13,530 2,144 - - 15,674
Finance lease
liabilities 1,171 (677) 313 807 (807) - - - - -
Hire purchase
liabilities - - - - 807 807 (377) - 179 609
Term loans 14,261 1,491 - 15,752 - 15,752 (4,122) - - 11,630
Export financing 2,161 (1,372) - 789 - 789 1,600 - - 2,389
Revolving credits 2,019 (56) - 1,963 - 1,963 (1,428) - - 535
Foreign currency
trade loan - 352 - 352 - 352 (352) - - -
Lease liabilities - - - - 23,400 23,400 (3,033) 508 - 20,875
Total liabilities
from financing
activities 27,001 6,354 313 33,668 23,400 57,068 (5,238) 508 179 52,517

Net At Net
changes 30 June changes
At from 2019/ from At
1 July financing 1 July financing 30 June
2018 cash flows 2019 cash flows 2020
RM’000 RM’000 RM’000 RM’000 RM’000
Company
Term loans/
Total liabilities from financing activities 3,069 (1,084) 1,985 (1,128) 857

The accompanying notes form an integral part of the financial statements.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
 FINANCIAL STATEMENTS 77

Notes to the Financial Statements

Karex Berhad is a public limited liability company, incorporated and domiciled in Malaysia and is listed on the Main Market
of Bursa Malaysia Securities Berhad. The addresses of the principal place of business and registered office of the Company
are as follows:

Principal place of business

Lot 594, Persiaran Raja Lumu
Pandamaran Industrial Estate
42000 Port Klang
Selangor Darul Ehsan
Malaysia

Registered office
10th Floor, Menara Hap Seng
No. 1 & 3, Jalan P. Ramlee
50250 Kuala Lumpur
Malaysia

The consolidated financial statements of the Company as at and for the financial year ended 30 June 2020 comprise
the Company and its subsidiaries (together referred to as the “Group” and individually referred to as “Group entities”).
The financial statements of the Company as at and for the financial year ended 30 June 2020 do not include other entities.

The principal activity of the Company consists of investment holding. The principal activities of the subsidiaries are disclosed
in Note 5.

These financial statements were authorised for issue by the Board of Directors on 9 October 2020.

1. BASIS OF PREPARATION

(a) Statement of compliance

The financial statements of the Group and of the Company have been prepared in accordance with Malaysian
Financial Reporting Standards (“MFRSs”), International Financial Reporting Standards and the requirements of
the Companies Act 2016 in Malaysia.

The following are accounting standards, interpretations and amendments of the MFRSs that have been issued by
the Malaysian Accounting Standards Board (“MASB”) but have not been adopted by the Group and the Company.

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January
2020

• Amendments to MFRS 3, Business Combinations – Definition of a Business

• Amendments to MFRS 101, Presentation of Financial Statements and MFRS 108, Accounting Policies,
Changes in Accounting Estimates and Errors – Definition of Material
• Amendments to MFRS 9, Financial Instruments, MFRS 139, Financial Instruments: Recognition and
Measurement and MFRS 7, Financial Instruments: Disclosures – Interest Rate Benchmark Reform

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 June 2020

• Amendment to MFRS 16, Leases – Covid-19-Related Rent Concessions

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

78 FINANCIAL STATEMENTS

Notes to the Financial Statements

1. BASIS OF PREPARATION (CONTINUED)

(a) Statement of compliance (continued)

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2022

• Amendments to MFRS 1, First-time Adoption of Malaysian Financial Reporting Standards (Annual

Improvements to MFRS Standards 2018−2020)
• Amendments to MFRS 3, Business Combinations – Reference to the Conceptual Framework
• Amendments to MFRS 9, Financial Instruments (Annual Improvements to MFRS Standards 2018−2020)
• Amendments to Illustrative Examples accompanying MFRS 16, Leases (Annual Improvements to MFRS
Standards 2018−2020)
• Amendments to MFRS 116, Property, Plant and Equipment − Proceeds before Intended Use
• Amendments to MFRS 137, Provisions, Contingent Liabilities and Contingent Assets − Onerous Contracts
− Cost of Fulfilling a Contract
• Amendments to MFRS 141, Agriculture (Annual Improvements to MFRS Standards 2018−2020)

MFRSs, interpretations and amendments effective for annual periods beginning on or after 1 January 2023

• MFRS 17, Insurance Contracts

• Amendments to MFRS 101, Presentation of Financial Statements – Classification of Liabilities as Current or
Non-current

MFRSs, interpretations and amendments effective for annual periods beginning on or after a date yet to
be confirmed

• Amendments to MFRS 10, Consolidated Financial Statements and MFRS 128, Investments in Associates
and Joint Ventures – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

The Group and the Company plan to apply the abovementioned accounting standards, interpretations and
amendments in the respective financial year when the above accounting standards, interpretations and
amendments become effective, if applicable.

The initial application of the accounting standards, interpretations and amendments are not expected to have
any material financial impacts to the current period and prior period financial statements of the Group and the
Company upon their first adoption.

(b) Basis of measurement

These financial statements have been prepared on the historical cost basis other than as disclosed in Note 2.

(c) Functional and presentation currency

These financial statements are presented in Ringgit Malaysia (“RM”), which is the Company’s functional currency.
All financial information is presented in RM and has been rounded to the nearest thousand, unless otherwise
stated.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 79

Notes to the Financial Statements

1. BASIS OF PREPARATION (CONTINUED)

(d) Use of estimates and judgements

The preparation of the financial statements in conformity with MFRSs requires management to make judgements,
estimates and assumptions that affect the application of accounting policies and the reported amounts of assets,
liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimates are revised and in any future periods affected.

There are no significant areas of estimation uncertainty and critical judgements in applying accounting policies that have
significant effect on the amounts recognised in the financial statements other than those disclosed in the following notes:

• Note 4 - extension options and incremental borrowing rate in relation to leases

• Note 6 - intangible assets
• Note 8 - measurement of allowance for slow-moving inventories
• Note 25.4 - measurement of expected credit loss (“ECL”)

2. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to the periods presented in these financial
statements and have been applied consistently by Group entities, unless otherwise stated.

Arising from the adoption of MFRS 16, Leases, there are changes to the accounting policies applied to lease contracts
entered into by the Group entities as compared to those applied in the previous financial statements. The impacts
arising from the changes are disclosed in Note 29.

(a) Basis of consolidation

(i) Subsidiaries
Subsidiaries are entities, including structured entities, controlled by the Company. The financial statements
of subsidiaries are included in the consolidated financial statements from the date that control commences
until the date that control ceases.

The Group controls an entity when it is exposed, or has rights, to variable returns from its involvement with
the entity and has the ability to affect those returns through its power over the entity. Potential voting rights
are considered when assessing control only when such rights are substantive. The Group also considers it
has de facto power over an investee when, despite not having the majority of voting rights, it has the current
ability to direct the activities of the investee that significantly affect the investee’s return.

Investments in subsidiaries are measured in the Company’s statement of financial position at cost less any
impairment losses, unless the investment is classified as held for sale or distribution. The cost of investment
includes transaction costs.

(ii) Business combinations

Business combinations are accounted for using the acquisition method from the acquisition date, which is
the date on which control is transferred to the Group.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

80 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Basis of consolidation (continued)

(ii) Business combinations (continued)

For new acquisitions, the Group measures the cost of goodwill at the acquisition date as:

• the fair value of the consideration transferred; plus

• the recognised amount of any non-controlling interests in the acquiree; plus
• if the business combination is achieved in stages, the fair value of the existing equity interest in the
acquiree; less
• the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities
assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

For each business combination, the Group elects whether it measures the non-controlling interests in the
acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets at the
acquisition date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group
incurs in connection with a business combination are expensed as incurred.

(iii) Acquisitions of non-controlling interests

The Group accounts for all changes in its ownership interest in a subsidiary that do not result in a loss of
control as equity transactions between the Group and its non-controlling interest holders. Any difference
between the Group’s share of net assets before and after the change, and any consideration received or
paid, is adjusted to or against Group reserves.

(iv) Restructuring among common shareholders

During a restructuring where the combining entities are controlled by the same parties both before and after
the combination, book value accounting is applied. The assets and liabilities acquired are recognised in the
consolidated financial statements at their respective carrying amounts without restatement. The difference
between the cost of acquisition and the nominal value of the shares acquired together with any other
reserves of the combining entities are taken to merger reserve (or adjusted against any suitable reserve in
the case of debit differences). The other components of equity of the acquired entities are added to the same
components within group equity.

(v) Loss of control

Upon the loss of control of a subsidiary, the Group derecognises the assets and liabilities of the former
subsidiary, any non-controlling interests and the other components of equity related to the former subsidiary
from the consolidated statement of financial position. Any surplus or deficit arising on the loss of control
is recognised in profit or loss. If the Group retains any interest in the former subsidiary, then such interest
is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity
accounted investee or as a financial asset depending on the level of influence retained.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 81

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(a) Basis of consolidation (continued)

(vi) Non-controlling interests

Non-controlling interests at the end of the reporting period, being the equity in a subsidiary not attributable
directly or indirectly to the equity holders of the Company, are presented in the consolidated statement of
financial position and statement of changes in equity within equity, separately from equity attributable to the
owners of the Company. Non-controlling interests in the results of the Group is presented in the consolidated
statement of profit or loss and other comprehensive income as an allocation of the profit or loss and the
comprehensive income for the year between non-controlling interests and owners of the Company.

Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests
even if doing so causes the non-controlling interests to have a deficit balance.

(vii) Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group
transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at
exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the end of the reporting period are
retranslated to the functional currency at the exchange rate at that date.

Non-monetary assets and liabilities denominated in foreign currencies are not retranslated at the end of
the reporting date, except for those that are measured at fair value which are retranslated to the functional
currency at the exchange rate at the date that the fair value was determined.

Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences arising on
the retranslation of equity instruments where they are measured at fair value through other comprehensive income or
a financial instrument designated as a cash flow hedge, which are recognised in other comprehensive income.

In the consolidated financial statements, when settlement of a monetary item receivable from or payable to a foreign
operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising
from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised
in other comprehensive income, and are presented in the foreign currency translation reserve (“FCTR”) in equity.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

82 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(b) Foreign currency (continued)

(ii) Operations denominated in functional currencies other than Ringgit Malaysia

The assets and liabilities of operations denominated in functional currencies other than RM, including
goodwill and fair value adjustments arising on acquisition, are translated to RM at exchange rates at the
end of the reporting period. The income and expenses of foreign operations, excluding foreign operations in
hyperinflationary economies, are translated to RM at exchange rates at the dates of the transactions.

Foreign currency differences are recognised in other comprehensive income and accumulated in the FCTR
in equity. However, if the operation is a non-wholly-owned subsidiary, then the relevant proportionate share
of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed
of such that control, significant influence or joint control is lost, the cumulative amount in the FCTR related
to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal.

When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation, the
relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group
disposes of only part of its investment in an associate or joint venture that includes a foreign operation while
retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified
to profit or loss.

(c) Financial instruments

(i) Recognition and initial measurement

A financial asset or a financial liability is recognised in the statement of financial position when, and only
when, the Group or the Company becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without significant financing component) or a financial
liability is initially measured at fair value plus or minus, for an item not at fair value through profit or loss,
transaction costs that are directly attributable to its acquisition or issuance. A trade receivable without a
significant financing component is initially measured at the transaction price.

An embedded derivative is recognised separately from the host contract where the host contract is not
a financial asset, and accounted for separately if, and only if, the derivative is not closely related to the
economic characteristics and risks of the host contract and the host contract is not measured at fair value
through profit or loss. The host contract, in the event an embedded derivative is recognised separately,
is accounted for in accordance with policy applicable to the nature of the host contract.

(ii) Financial instrument categories and subsequent measurement

Financial assets

Categories of financial assets are determined on initial recognition and are not reclassified subsequent to
their initial recognition unless the Group or the Company changes its business model for managing financial
assets in which case all affected financial assets are reclassified on the first day of the first reporting period
following the change of the business model.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 83

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Financial instruments (continued)

(ii) Financial instrument categories and subsequent measurement (continued)

Financial assets (continued)

The categories of financial assets at initial recognition are as follows:

(a) Amortised cost

Amortised cost category comprises financial assets that are held within a business model whose
objective is to hold assets to collect contractual cash flows and its contractual terms give rise on
specified dates to cash flows that are solely payments of principal and interest on the principal amount
outstanding. The financial assets are not designated as fair value through profit or loss. Subsequent
to initial recognition, these financial assets are measured at amortised cost using the effective interest
method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains
and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is
recognised in profit or loss.

Interest income is recognised by applying effective interest rate to the gross carrying amount except
for credit impaired financial assets (see Note 2(k)(i)) where the effective interest rate is applied to the
amortised cost.

(b) Fair value through profit or loss

All financial assets not measured at amortised cost or fair value through other comprehensive income are
measured at fair value through profit or loss. This includes derivative financial assets (except for a derivative
that is a designated and effective hedging instrument). On initial recognition, the Group or the Company may
irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised
cost or at fair value through other comprehensive income as at fair value through profit or loss if doing so
eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets categorised as fair value through profit or loss are subsequently measured at their fair
value. Net gains or losses, including any interest or dividend income, are recognised in the profit or loss.

All financial assets, except for those measured at fair value through profit or loss are subject to impairment
assessment (see Note 2(k)(i)).

Financial liabilities

The categories of financial liabilities at initial recognition are as follows:

(a) Fair value through profit or loss

Fair value through profit or loss category comprises financial liabilities that are derivatives (except for
a derivative that is a financial guarantee contract or a designated and effective hedging instrument),
contingent consideration in a business combination and financial liabilities that are specifically
designated into this category upon initial recognition.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

84 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Financial instruments (continued)

(ii) Financial instrument categories and subsequent measurement (continued)

Financial liabilities (continued)

(a) Fair value through profit or loss (continued)

On initial recognition, the Group or the Company may irrevocably designate a financial liability that otherwise
meets the requirements to be measured at amortised cost as at fair value through profit or loss:

(a) if doing so eliminates or significantly reduces an accounting mismatch that would otherwise
arise;
(b) a group of financial liabilities or assets and financial liabilities is managed and its performance is
evaluated on a fair value basis, in accordance with a documented risk management or investment
strategy, and information about the group is provided internally on that basis to the Group’s key
management personnel; or
(c) if a contract contains one or more embedded derivatives and the host is not a financial asset in
the scope of MFRS 9, where the embedded derivative significantly modifies the cash flows and
separation is not prohibited.

Financial liabilities categorised as fair value through profit or loss are subsequently measured at their
fair value with gains or losses, including any interest expense are recognised in the profit or loss.

For financial liabilities where it is designated as fair value through profit or loss upon initial recognition,
the Group and the Company recognise the amount of change in fair value of the financial liability that
is attributable to change in credit risk in the other comprehensive income and remaining amount of the
change in fair value in the profit or loss, unless the treatment of the effects of changes in the liability’s
credit risk would create or enlarge an accounting mismatch.

(b) Amortised cost

Other financial liabilities not categorised as fair value through profit or loss are subsequently measured
at amortised cost using the effective interest method.

Interest expense and foreign exchange gains and losses are recognised in the profit or loss. Any gains
or losses on derecognition are also recognised in the profit or loss.

(iii) Regular way purchase or sale of financial assets

A regular way purchase or sale of financial assets is recognised and derecognised, as applicable,
using trade date or settlement date accounting in the current year.

Trade date accounting refers to:

(a) the recognition of an asset to be received and the liability to pay for it on the trade date, and
(b) derecognition of an asset that is sold, recognition of any gain or loss on disposal and the recognition
of a receivable from the buyer for payment on the trade date.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 85

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(c) Financial instruments (continued)

(iii) Regular way purchase or sale of financial assets (continued)

Settlement date accounting refers to:

(a) the recognition of an asset on the day it is received by the Group or the Company, and
(b) derecognition of an asset and recognition of any gain or loss on disposal on the day that is delivered
by the Group or the Company.

Any change in the fair value of the asset to be received during the period between the trade date and the
settlement date is accounted in the same way as it accounts for the acquired asset.

Generally, the Group or the Company applies settlement date accounting unless otherwise stated for the
specific class of asset.

(iv) Financial guarantee contracts

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse
the holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with
the original or modified terms of a debt instrument.

Financial guarantees issued are initially measured at fair value. Subsequently, they are measured at higher of:

• the amount of the loss allowance; and

• the amount initially recognised less, when appropriate, the cumulative amount of income recognised
in accordance to the principles of MFRS 15, Revenue from Contracts with Customers.

Liabilities arising from financial guarantees are presented together with other provisions.

(v) Derecognition

A financial asset or part of it is derecognised when, and only when, the contractual rights to the cash flows from
the financial asset expire or transferred, or control of the asset is not retained or substantially all of the risks
and rewards of ownership of the financial asset are transferred to another party. On derecognition of a financial
asset, the difference between the carrying amount of the financial asset and the sum of consideration received
(including any new asset obtained less any new liability assumed) is recognised in profit or loss.

A financial liability or a part of it is derecognised when, and only when, the obligation specified in the contract
is discharged, cancelled or expires. A financial liability is also derecognised when its terms are modified and
the cash flows of the modified liability are substantially different, in which case, a new financial liability based
on modified terms is recognised at fair value. On derecognition of a financial liability, the difference between
the carrying amount of the financial liability extinguished or transferred to another party and the consideration
paid, including any non-cash assets transferred or liabilities assumed, is recognised in profit or loss.

(vi) Offsetting

Financial assets and financial liabilities are offset and the net amount presented in the statement of financial
position when, and only when, the Group or the Company currently has a legally enforceable right to set off the
amounts and it intends either to settle them on a net basis or to realise the asset and liability simultaneously.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

86 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(d) Property, plant and equipment

(i) Recognition and measurement
Items of property, plant and equipment are measured at cost less any accumulated depreciation and any
accumulated impairment losses.

Cost includes expenditures that are directly attributable to the acquisition of the asset and any other costs
directly attributable to bringing the asset to working condition for its intended use, and the costs of dismantling
and removing the items and restoring the site on which they are located. The cost of self-constructed assets
also includes the cost of materials and direct labour. For qualifying assets, borrowing costs are capitalised in
accordance with the accounting policy on borrowing costs. Cost also may include transfers from equity of any
gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment.

Purchased software that is integral to the functionality of the related equipment is capitalised as part of that
equipment.

When significant parts of an item of property, plant and equipment have different useful lives, they are
accounted for as separate items (major components) of property, plant and equipment.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the
proceeds from disposal with the carrying amount of property, plant and equipment and is recognised net within
“other income” and “other expenses” respectively in profit or loss.

(ii) Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying
amount of the item if it is probable that the future economic benefits embodied within the component will flow
to the Group or the Company, and its cost can be measured reliably. The carrying amount of the replaced
component is derecognised to profit or loss. The costs of the day-to-day servicing of property, plant and
equipment are recognised in profit or loss as incurred.

(iii) Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual
assets are assessed, and if a component has a useful life that is different from the remainder of that asset, then
that component is depreciated separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each
component of an item of property, plant and equipment from the date that they are available for use. Freehold
land is not depreciated. Property, plant and equipment under construction are not depreciated until the assets
are ready for their intended use.

The estimated useful lives for the current and comparative periods are as follows:
Buildings 20 - 50 years
Plant and machinery 10 - 20 years
Motor vehicles 5 - 10 years
Electrical installation, renovation, equipment, furniture and fittings 3 - 10 years

Depreciation methods, useful lives and residual values are reviewed at end of the reporting period,
and adjusted as appropriate.

In prior financial year, renovation was depreciated on a straight-line basis over the estimated useful lives of
5 years.

During the year, the estimated useful lives of the renovation have been revised to 10 years.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 87

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Leases

The Group has applied MFRS 16 using the modified retrospective approach with no cumulative effect recognised
in the retained earnings at 1 July 2019. Accordingly, the comparative information presented for 30 June 2019 has
not been restated - i.e. it is presented, as previously reported under MFRS 117, Leases and related interpretations.

Current financial year

(i) Definition of a lease

A contract is, or contains, a lease if the contract conveys a right to control the use of an identified asset for
a period of time in exchange for consideration. To assess whether a contract conveys the right to control the
use of an identified asset, the Group assesses whether:

• the contract involves the use of an identified asset - this may be specified explicitly or implicitly, and
should be physically distinct or represent substantially all of the capacity of a physically distinct asset.
If the supplier has a substantive substitution right, then the asset is not identified;
• the customer has the right to obtain substantially all of the economic benefits from use of the asset
throughout the period of use; and
• the customer has the right to direct the use of the asset. The customer has this right when it has the
decision-making rights that are most relevant to changing how and for what purpose the asset is used.
In rare cases where the decision about how and for what purpose the asset is used is predetermined,
the customer has the right to direct the use of the asset if either the customer has the right to operate
the asset; or the customer designed the asset in a way that predetermines how and for what purpose
it will be used.

At inception or on reassessment of a contract that contains a lease component, the Group allocates
the consideration in the contract to each lease and non-lease component on the basis of their relative
stand-alone prices. However, for leases of properties in which the Group is a lessee, it has elected not to
separate non-lease components and will instead account for the lease and non-lease components as a
single lease component.

As a lessee

(i) Recognition and initial measurement

The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-
of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for
any lease payments made at or before the commencement date, plus any initial direct costs incurred and an
estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site
on which it is located, less any lease incentives received.

The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily
determined, the respective Group entities’ incremental borrowing rate. Generally, the Group entities use
their incremental borrowing rate as the discount rate.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

88 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Leases (continued)

Current financial year (continued)

As a lessee (continued)

(i) Recognition and initial measurement (continued)

Lease payments included in the measurement of the lease liability comprise the following:

• fixed payments, including in-substance fixed payments less any incentives receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate
as at the commencement date;
• amounts expected to be payable under a residual value guarantee;
• the exercise price under a purchase option that the Group is reasonably certain to exercise; and
• penalties for early termination of a lease unless the Group is reasonably certain not to terminate early.

The Group excludes variable lease payments that linked to future performance or usage of the underlying
asset from the lease liability. Instead, these payments are recognised in profit or loss in the period in which
the performance or use occurs.

The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases that
have a lease term of 12 months or less and leases of low-value assets. The Group recognises the lease
payments associated with these leases as an expense on a straight-line basis over the lease term.

(ii) Subsequent measurement

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement
date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term.
The estimated useful lives of right-of-use assets are determined on the same basis as those of property,
plant and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any,
and adjusted for certain remeasurements of the lease liability.

The lease liability is measured at amortised cost using the effective interest method. It is remeasured when
there is a change in future lease payments arising from a change in an index or rate, if there is a revision of
in-substance fixed lease payments, or if there is a change in the Group’s estimate of the amount expected to
be payable under a residual value guarantee, or if the Group changes its assessment of whether it will exercise
a purchase, extension or termination option.

When the lease liability is remeasured, a corresponding adjustment is made to the carrying amount of the right-
of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced
to zero.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 89

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(e) Leases (continued)

Previous financial year

As a lessee

(i) Finance lease

Leases in terms of which the Group or the Company assumed substantially all the risks and rewards of ownership
were classified as finance leases. Upon initial recognition, the leased asset was measured at an amount equal to
the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition,
the asset was accounted for in accordance with the accounting policy applicable to that asset.

Minimum lease payments made under finance leases were apportioned between the finance expense and
the reduction of the outstanding liability. The finance expense was allocated to each period during the
lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Contingent lease payments were accounted for by revising the minimum lease payments over the remaining
term of the lease when the lease adjustment was confirmed.

Leasehold land which in substance was a finance lease was classified as property, plant and equipment,
or as investment property if held to earn rental income or for capital appreciation or for both.

(ii) Operating lease

Leases, where the Group or the Company did not assume substantially all the risks and rewards of ownership
were classified as operating leases and, except for property interest held under operating lease, the leased
assets were not recognised on the statement of financial position. Property interest held under an operating
lease, which was held to earn rental income or for capital appreciation or both, was classified as investment
property and measured using fair value model.

Payments made under operating leases were recognised in profit or loss on a straight-line basis over the
term of the lease. Lease incentives received were recognised in profit or loss as an integral part of the total
lease expense, over the term of the lease. Contingent rentals were charged to profit or loss in the reporting
period in which they were incurred.

Leasehold land which in substance was an operating lease was classified as prepaid lease payments.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

90 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f) Intangible assets

(i) Goodwill

Goodwill arises on business combinations is measured at cost less any accumulated impairment losses.
In respect of equity-accounted associates and joint venture, the carrying amount of goodwill is included in
the carrying amount of the investment and an impairment loss on such an investment is not allocated to any
asset, including goodwill, that forms part of the carrying amount of the equity-accounted associates and joint
venture.

(ii) Brands

Brands that are acquired by the Group, which have indefinite useful lives, are measured at cost less any
accumulated impairment losses.

(iii) Patents and trademarks

Patents and trademarks acquired by the Group, which have finite useful lives are measured at cost less any
accumulated amortisation and any accumulated impairment losses.

(iv) Other intangible assets

Other intangible assets acquired by the Group, which have finite useful lives, are measured at cost less any
accumulated amortisation and any accumulated impairment losses. Other intangible assets with indefinite
useful lives are measured at cost less any accumulated impairment losses.

(v) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in
the specific asset to which it relates. All other expenditure, including expenditure on internally generated
goodwill and brands, is recognised in profit or loss as incurred.

(vi) Amortisation

Goodwill and intangible assets with indefinite useful lives are not amortised but are tested for impairment
annually and whenever there is an indication that they may be impaired.

Other intangible assets with finite useful lives are amortised from the date that they are available for use.
Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised in profit or
loss on a straight-line basis over the estimated useful lives of intangible assets.

The estimated useful lives for the current and comparative periods are as follows:

• Patents and trademarks 10 - 15 years

Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and
adjusted, if appropriate.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 91

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(g) Inventories

Inventories are measured at the lower of cost and net realisable value.

The cost of inventories is calculated using the first-in first-out method, and includes expenditure incurred in
acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing
location and condition. In the case of work-in-progress and finished goods, cost includes an appropriate share of
production overheads based on normal operating capacity.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of
completion and the estimated costs necessary to make the sale.

(h) Non-current asset held for sale or distribution to owners

Non-current assets that are expected to be recovered primarily through sale or distribution to owners rather than
through continuing use, are classified as held for sale or distribution.

Immediately before classification as held for sale or distribution, the assets are remeasured in accordance with the
Group’s accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount
and fair value less costs of disposal.

Impairment losses on initial classification as held for sale or distribution and subsequent gains or losses on
remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

Property, plant and equipment once classified as held for sale or distribution are not amortised or depreciated.

(i) Contract asset

A contract asset is recognised when the Group’s right to consideration is conditional on something other than the passage
of time. A contract asset is subject to impairment in accordance to MFRS 9, Financial Instruments (see Note 2(k)(i)).

(j) Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, balances and deposits with banks and highly liquid investments
which have an insignificant risk of changes in fair value with original maturities of three months or less, and are used by
the Group and the Company in the management of their short term commitments. For the purpose of the statement of
cash flows, cash and cash equivalents are presented net of bank overdrafts and pledged deposits.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

92 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment

(i) Financial assets

The Group and the Company recognise loss allowances for expected credit losses on financial assets
measured at amortised cost and contract assets. Expected credit losses are a probability-weighted estimate
of credit losses.

The Group and the Company measure loss allowances at an amount equal to lifetime expected credit
loss, except for cash and bank balance for which credit risk has not increased significantly since initial
recognition, which are measured at 12-month expected credit loss. Loss allowances for trade receivables
and contract assets are always measured at an amount equal to lifetime expected credit loss.

When determining whether the credit risk of a financial asset has increased significantly since initial
recognition and when estimating expected credit loss, the Group and the Company consider reasonable
and supportable information that is relevant and available without undue cost or effort. This includes both
quantitative and qualitative information and analysis, based on the Group’s historical experience and
informed credit assessment and including forward-looking information, where available.

Lifetime expected credit losses are the expected credit losses that result from all possible default events
over the expected life of the asset, while 12-month expected credit losses are the portion of expected credit
losses that result from default events that are possible within the 12 months after the reporting date. The
maximum period considered when estimating expected credit losses is the maximum contractual period
over which the Group and the Company are exposed to credit risk.

The Group and the Company estimate the expected credit losses on trade receivables using a simplified
approach.

An impairment loss in respect of financial assets measured at amortised cost is recognised in profit or loss
and the carrying amount of the asset is reduced through the use of an allowance account.

At each reporting date, the Group and the Company assess whether financial assets carried at amortised
cost are credit-impaired. A financial asset is credit impaired when one or more events that have a detrimental
impact on the estimated future cash flows of the financial asset have occurred.

The gross carrying amount of a financial asset is written off (either partially or full) to the extent that there
is no realistic prospect of recovery. This is generally the case when the Group or the Company determines
that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay
the amounts subject to the write-off. However, financial assets that are written off could still be subject
to enforcement activities in order to comply with the Group’s or the Company’s procedures for recovery
amounts due.

(ii) Other assets

The carrying amounts of other assets (except for inventories, contract assets, deferred tax assets, assets arising
from employee benefits and non-current assets classified as held for sale) are reviewed at the end of each
reporting period to determine whether there is any indication of impairment. If any such indication exists, then the
asset’s recoverable amount is estimated. For goodwill, and intangible assets that have indefinite useful lives or
that are not yet available for use, the recoverable amount is estimated each period at the same time.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 93

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k) Impairment (continued)

(ii) Other assets (continued)

For the purpose of impairment testing, assets are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of the cash inflows of other
assets or cash-generating units. Subject to an operating segment ceiling test, for the purpose of goodwill
impairment testing, cash-generating units to which goodwill has been allocated are aggregated so that the
level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for
internal reporting purposes. The goodwill acquired in a business combination, for the purpose of impairment
testing, is allocated to a cash-generating unit or a group of cash-generating units that are expected to benefit
from the synergies of the combination.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair
value less costs of disposal. In assessing value in use, the estimated future cash flows are discounted to
their present value using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset or cash-generating unit.

An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit
exceeds its estimated recoverable amount.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of
cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the
cash-generating unit (group of cash-generating units) and then to reduce the carrying amount of the other
assets in the cash-generating unit (groups of cash-generating units) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses
recognised in prior periods are assessed at the end of each reporting period for any indications that the
loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount since the last impairment loss was recognised. An
impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying
amount that would have been determined, net of depreciation or amortisation, if no impairment loss had
been recognised. Reversals of impairment losses are credited to profit or loss in the financial year in which
the reversals are recognised.

(l) Equity instruments

Instruments classified as equity are measured at cost on initial recognition and are not remeasured subsequently.

(i) Issue expenses

Costs directly attributable to the issue of instruments classified as equity are recognised as a deduction from equity.

(ii) Ordinary shares

Ordinary shares are classified as equity.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

94 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(m) Income tax

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or
loss except to the extent that it relates to a business combination or items recognised directly in equity or other
comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates
enacted or substantively enacted by the end of the reporting period, and any adjustment to tax payable in respect
of previous financial years.

Deferred tax is recognised using the liability method, providing for temporary differences between the carrying
amounts of assets and liabilities in the statement of financial position and their tax bases. Deferred tax is not
recognised for the following temporary differences: the initial recognition of goodwill, the initial recognition of assets
or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit
or loss. Deferred tax is measured at the tax rates that are expected to be applied to the temporary differences when
they reverse, based on the laws that have been enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and
assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different
tax entities, but they intend to settle current tax assets and liabilities on a net basis or their tax assets and liabilities
will be realised simultaneously.

A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against
which the temporary difference can be utilised. Deferred tax assets are reviewed at the end of each reporting period
and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

(n) Borrowing costs

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset
are recognised in profit or loss using the effective interest method.

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time to get ready for their intended use or sale, are capitalised
as part of the cost of those assets.

The capitalisation of borrowing costs as part of the cost of a qualifying asset commences when expenditure for the
asset is being incurred, borrowing costs are being incurred and activities that are necessary to prepare the asset for its
intended use or sale are in progress. Capitalisation of borrowing costs is suspended or ceases when substantially all
the activities necessary to prepare the qualifying asset for its intended use or sale are interrupted or completed.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs eligible for capitalisation.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 95

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(o) Revenue and other income

(i) Revenue

Revenue is measured based on the consideration specified in a contract with a customer in exchange
for transferring goods or services to a customer, excluding amounts collected on behalf of third parties.
The Group or the Company recognises revenue when (or as) it transfers control over a product or service to
customer. An asset is transferred when (or as) the customer obtains control of the asset.

The Group or the Company transfers control of a good or service at a point in time unless one of the
following over time criteria is met:

(a) the customer simultaneously receives and consumes the benefits provided as the Group or the
Company performs;

(b) the Group’s or the Company’s performance creates or enhances an asset that the customer controls
as the asset is created or enhanced; or

(c) the Group’s or the Company’s performance does not create an asset with an alternative use and the
Group or the Company has an enforceable right to payment for performance completed to date.

(ii) Dividend income

Dividend income is recognised in profit or loss on the date that the Group’s or the Company’s right to receive
payment is established, which in the case of quoted securities is the ex-dividend date.

(iii) Interest income

Interest income is recognised as it accrues using the effective interest method in profit or loss except
for interest income arising from temporary investment of borrowings taken specifically for the purpose of
obtaining a qualifying asset which is accounted for in accordance with the accounting policy on borrowing
costs.

(iv) Government grants

Government grants are recognised initially as deferred income at fair value when there is reasonable
assurance that they will be received and that the Group will comply with the conditions associated with the
grant; they are then recognised in profit or loss as other income on a systematic basis over the useful life of
the asset.

Grants that compensate the Group for expenses incurred are recognised in profit or loss on a systematic
basis in the same period in which the expenses are recognised.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

96 FINANCIAL STATEMENTS

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(p) Employee benefits

(i) Short-term employee benefits

Short-term employee benefit obligations in respect of salaries, annual bonuses, paid annual leave and sick
leave are measured on an undiscounted basis and are expensed as the related service is provided.

A liability is recognised for the amount expected to be paid under short term cash bonus or profit-sharing
plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee and the obligation can be estimated reliably.

(ii) State plans

The Group’s contributions to statutory pension funds are charged to profit or loss in the financial year to
which they relate. Prepaid contributions are recognised as an asset to the extent that a cash refund or a
reduction in future payments is available.

(iii) Defined benefit plans

The Group provides for post employment retirement benefits, payable to employees under the labour laws
applicable in Thailand in respect of its subsidiaries incorporated in Thailand.

The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by
estimating the amount of future benefit that employees have earned in return for their service in the current
and prior periods; that benefit is discounted to determine its present value. Any unrecognised past service
costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date
on government bonds that have maturity dates approximating the terms of the Group’s obligations and that
are denominated in the same currency in which the benefits are expected to be paid.

The calculation is performed by a qualified actuary using the projected unit credit method. When the
calculation results in a benefit to the Group, the recognised asset is limited to the total of any unrecognised
past service costs and the present value of economic benefits available in the form of any future refunds
from the plan or reductions in future contributions to the plan. In order to calculate the present value of
economic benefits, consideration is given to any minimum funding requirements that apply to any plan in the
Company. An economic benefit is available to the Company if it is realisable during the life of the plan, or on
settlement of the plan liabilities.

When the benefits of a plan are improved, the portion of the increased benefit relating to past service by
employees is recognised in profit or loss on a straight-line basis over the average period until the benefits
become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in
profit or loss.

Actuarial gains and losses arising from defined benefit plans will be recognised as income or expense in
the statement of other comprehensive income and all expenses related to defined benefit plans will be
recognised as income and expense in profit or loss.

As the amount involved is not material to the Group. Accordingly, no further disclosure as required by the
standard is made.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 97

Notes to the Financial Statements

2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q) Earnings per ordinary share

The Group presents basic and diluted earnings per share data for its ordinary shares (“EPS”).

Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the
weighted average number of ordinary shares outstanding during the period, adjusted for own shares held.

Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted
average number of ordinary shares outstanding, adjusted for own shares held, for the effects of all dilutive potential
ordinary shares, which comprise convertible notes and share options granted to employees.

(r) Operating segments

An operating segment is a component of the Group that engages in business activities from which it may earn
revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s
other components. Operating segment results are reviewed regularly by the chief operating decision maker, which
in this case is the Chief Executive Officer of the Group, to make decisions about resources to be allocated to the
segment and to assess its performance, and for which discrete financial information is available.

(s) Fair value measurements

Fair value of an asset or a liability, except for share-based payment and lease transactions, is determined as
the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between
market participants at the measurement date. The measurement assumes that the transaction to sell the asset or
transfer the liability takes place either in the principal market or in the absence of a principal market, in the most
advantageous market.

For non-financial asset, the fair value measurement takes into account a market participant’s ability to generate
economic benefits by using the asset in its highest and best use or by selling it to another market participant that
would use the asset in its highest and best use.

When measuring the fair value of an asset or a liability, the Group uses observable market data as far as possible.
Fair value is categorised into different levels in a fair value hierarchy based on the input used in the valuation
technique as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group can access
at the measurement date.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly or indirectly.

Level 3: unobservable inputs for the asset or liability.

The Group recognises transfers between levels of the fair value hierarchy as of the date of the event or change in
circumstances that caused the transfers.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

98 FINANCIAL STATEMENTS

Notes to the Financial Statements

3. PROPERTY, PLANT AND EQUIPMENT

Electrical
Land Plant Equipment, installation
and and furniture and Motor Construction
buildings machinery and fittings renovation vehicles -in -progress Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
At cost
At 1 July 2018 95,392 153,489 21,921 27,328 8,044 25,063 331,237
Additions (see Note 23) 916 5,675 1,772 1,118 995 8,501 18,977
Disposals - (588) (70) - (3,535) (172) (4,365)
Written off - (310) (11) - (138) (3) (462)
Transfers 3,576 9,772 348 1,571 - (15,267) -
Translation differences 3,869 5,870 353 1,690 121 850 12,753
At 30 June 2019, as previously
reported 103,753 173,908 24,313 31,707 5,487 18,972 358,140
Adjustment on initial application
of MFRS 16 (9,965) - - - - - (9,965)
At 1 July 2019, as restated 93,788 173,908 24,313 31,707 5,487 18,972 348,175
Additions (see Note 23) 1,138 7,824 1,778 1,693 336 10,314 23,083
Disposals (13) (900) (5) (214) (51) (169) (1,352)
Written off - (119) (5) - - - (124)
Transfers 105 9,388 162 2,413 - (12,068) -
Translation differences 1,119 2,026 152 558 37 154 4,046
At 30 June 2020 96,137 192,127 26,395 36,157 5,809 17,203 373,828

Accumulated depreciation
At 1 July 2018 12,377 78,829 12,410 11,771 5,207 - 120,594
Depreciation charge 2,186 8,586 2,268 1,749 741 - 15,530
Disposals - (117) (67) - (2,363) - (2,547)
Written off - (210) (10) - (85) - (305)
Translation differences 669 2,896 197 279 92 - 4,133
At 30 June 2019, as previously
reported 15,232 89,984 14,798 13,799 3,592 - 137,405
Adjustment on initial application
of MFRS 16 (388) - - - - - (388)
At 1 July 2019, as restated 14,844 89,984 14,798 13,799 3,592 - 137,017
Depreciation charge 2,132 9,618 2,480 1,940 529 - 16,699
Disposals (1) (113) (5) (28) (46) - (193)
Written off - (41) (2) - - - (43)
Translation differences 215 1,910 102 (782) 31 - 1,476
At 30 June 2020 17,190 101,358 17,373 14,929 4,106 - 154,956

Carrying amounts
At 1 July 2018 83,015 74,660 9,511 15,557 2,837 25,063 210,643
At 30 June 2019 88,521 83,924 9,515 17,908 1,895 18,972 220,735
At 30 June 2020 78,947 90,769 9,022 21,228 1,703 17,203 218,872

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 99

Notes to the Financial Statements

3. PROPERTY, PLANT AND EQUIPMENT (CONTINUED)

Land and buildings

Included in the carrying amounts of land and buildings are:

Group
2020 2019
RM’000 RM’000
Land 19,899 28,350
Buildings 59,048 60,171
78,947 88,521

3.1 Security

The land and buildings and plant and machinery of the Group with a carrying amount of RM48,884,000
(2019: RM51,448,000) are charged to licensed banks as security for banking facilities granted as disclosed in
Note 14.

3.2 Leased motor vehicles

The carrying amount of motor vehicles of the Group acquired under hire purchase agreements is RM935,000
(2019: RM954,000).

3.3 Change in estimates

During the financial year ended 30 June 2020, the Group conducted a review on its depreciation policy for
property, plant and equipment, which management has revised the estimated useful life of renovation from
5 years to 10 years to reflect the actual useful life. The effect of these changes on depreciation expense, recognised
in cost of sales and administrative expenses, in current and future periods is as follows:

2020 2021 2022 2023 2024 Later

RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
(Decrease)/Increase in
depreciation expense (326) (262) (127) 3 161 551

Construction-in-progress

Construction-in-progress consists of assets relating to condom production facilities and other machineries which are in
process of being built and assembled and are not ready for intended use.

Others

In prior year, included in buildings of the Group was finance cost capitalised of RM195,000 at 4.18% per annum.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

100 FINANCIAL STATEMENTS

Notes to the Financial Statements

4. RIGHT-OF-USE ASSETS

Plant and
Land Buildings equipment Total
RM’000 RM’000 RM’000 RM’000
Group
At 1 July 2019 16,497 17,055 137 33,689
Addition - 514 - 514
Depreciation (463) (3,411) (50) (3,924)
Transfer to assets held for sale (281) - - (281)
Translation differences 202 (75) - 127
At 30 June 2020 15,955 14,083 87 30,125

The Group leases a number of land, hostels, factory buildings and equipment that run between 1 year and 99 years,
with an option to renew the lease after that date.

4.1 Extension options

Some leases of buildings contain extension options exercisable by the Group up to one year before the end of the
non-cancellable contract period. Where applicable, the Group seeks to include extension options in new leases
to provide operational flexibility. The extension options held are exercisable only by the Group and not by the
lessors. The Group assesses at lease commencement whether it is reasonably certain to exercise the extension
options. The Group reassesses whether it is reasonably certain to exercise the options if there is a significant
event or significant change in circumstances within its control.

Potential future
Lease lease payments Historical rate
liabilities not included in of exercise
recognised lease liabilities of extension
(discounted) (discounted) options
RM’000 RM’000 %
Group
Buildings 5,210 13,427 90

4.2 Significant judgements and assumptions in relation to lease

The Group assesses at lease commencement by applying significant judgement whether it is reasonably certain
to exercise the extension options. Group entities consider all facts and circumstances including their past practice
and any cost that will be incurred to change the asset if an option to extend is not taken, to help them determine
the lease term.

The Group also applied judgement and assumptions in determining the incremental borrowing rate of the
respective leases. Group entities first determine the closest available borrowing rates before using significant
judgement to determine the adjustments required to reflect the term, security, value or economic environment of
the respective leases.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 101

Notes to the Financial Statements

5. INVESTMENTS IN SUBSIDIARIES

Company
2020 2019
RM’000 RM’000
Cost of investment 283,675 279,865
Amounts due from subsidiaries - 3,810
283,675 283,675

The amounts due from subsidiaries are interest free, unsecured and do not have fixed repayment terms. The
management is of the view that, in substance, the amounts due from subsidiaries provided an exposure similar to an
investment in ordinary shares of the subsidiaries.

Details of the subsidiaries are as follows:

Principal place
of business/ Effective
Country of ownership interest
Name of entity Principal activities incorporation and voting interest
2020 2019
% %
Direct subsidiaries
Karex Industries Sdn. Bhd. Manufacture and sale of condoms, rubber Malaysia 100 100
products, personal lubricants and others
Hevea Medical Sdn. Bhd. Manufacture and sale of condoms, rubber Malaysia 100 100
products, personal lubricants and others
Innolatex Sdn. Bhd. Manufacture and sale of condoms, rubber Malaysia 100 100
products, personal lubricants and others
Innolatex (Thailand) Limited* Manufacture and sale of condoms, rubber Thailand 100 100
products, personal lubricants and others
Karex Global Limited* Investment holding Hong Kong 100 100
Medical-Latex (Dua) Sdn. Bhd. Manufacture and sale of condoms, rubber Malaysia 100 100
products, personal lubricants and others
Karex Holdings Sdn. Bhd. Investment holding Malaysia 100 100
Karex International Sdn. Bhd. Investment holding Malaysia 100 100
Karex Marketing Sdn. Bhd. Manufacturing and sale of hand sanitizers, Malaysia 100 100
trading products and others
Karex Polymers Limited* Manufacturing of pre-vulcanised latex Thailand 100 100

Subsidiary of Karex Holdings Sdn. Bhd.

Pasante Healthcare Limited* Wholesalers of healthcare products United Kingdom 100 100

Subsidiary of Karex Industries Sdn. Bhd.

Uro Technology Sdn. Bhd. Manufacturing and sale of urinary urethral Malaysia 100 100
products

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

102 FINANCIAL STATEMENTS

Notes to the Financial Statements

5. INVESTMENTS IN SUBSIDIARIES (CONTINUED)

Principal place
of business/ Effective
Country of ownership interest
Name of entity Principal activities incorporation and voting interest
2020 2019
% %
Subsidiary of Karex Global Limited
Global Protection Corporation* Distribution, packaging and marketing of United States 70 70
condoms and related products of America

Subsidiary of Global Protection Corporation

Global Protection Corp UK Dormant United Kingdom 100 100
Limited*

* Not audited by KPMG PLT

5.1 Non-controlling interests in subsidiaries

The Group’s subsidiaries that have material non-controlling interests (“NCI”) are as follows:

Global Protection Corporation

2020 2019
NCI percentage of ownership interest and voting interest 30% 30%

RM’000 RM’000
Carrying amount of NCI 4,951 1,576
Profit allocated to NCI 3,260 524
Total comprehensive income allocated to NCI 3,375 546

Summarised financial information before intra-group elimination

As at 30 June
Non-current assets 2,541 3,141
Current assets 37,517 27,166
Non-current liabilities (3,240) -
Current liabilities (20,314) (25,054)
Net assets 16,504 5,253

Year ended 30 June

Revenue 86,445 65,569
Profit for the year 10,867 1,747
Total comprehensive income 11,250 1,820

Cash flows from operating activities 5,640 293

Cash flows used in investing activities (48) (402)
Cash flows used in financing activities (1,499) (103)
Net increase/(decrease) in cash and cash equivalents 4,093 (212)

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 103

Notes to the Financial Statements

6. INTANGIBLE ASSETS

Patents Other
and intangible
Goodwill Brands trademarks assets Total
RM’000 RM’000 RM’000 RM’000 RM’000
Group
At cost
At 1 July 2018 27,230 60,755 1,799 5,947 95,731
Addition - - 802 - 802
Effect of movements in
exchange rates - 634 39 - 673
At 30 June 2019/1 July 2019 27,230 61,389 2,640 5,947 97,206
Addition - - 26 - 26
Effect of movements in
exchange rates - 984 181 - 1,165
At 30 June 2020 27,230 62,373 2,847 5,947 98,397

Accumulated amortisation
At 1 July 2018 - - 510 - 510
Amortisation charge - - 123 - 123
Effect of movements in
exchange rates - - 11 - 11
At 30 June 2019/1 July 2019 - - 644 - 644
Amortisation charge - - 202 - 202
Effect of movements in
exchange rates - - 26 - 26
At 30 June 2020 - - 872 - 872

Carrying amounts
At 1 July 2018 27,230 60,755 1,289 5,947 95,221
At 30 June 2019/1 July 2019 27,230 61,389 1,996 5,947 96,562
At 30 June 2020 27,230 62,373 1,975 5,947 97,525

Other intangible assets

Other intangible assets comprise of patents, distribution rights, websites, quality certifications and others that are
related to fitted condom and former production.

Amortisation

The brands and the other intangible assets are of such nature that they will continue to remain relevant to the Group in
terms of access to market, brand loyalty from customers, innovative business platform and restriction of new entrant.
The management expects the brands and the other intangible assets to generate net cash inflows indefinitely into the
future. As a result, no amortisation is provided against the carrying value of the brands and the other intangible assets
as the management believes that the lives of such assets are indefinite at this point.

The amortisation of patents and trademarks which have finite useful life are recognised and charged to the administration
expenses.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

104 FINANCIAL STATEMENTS

Notes to the Financial Statements

6. INTANGIBLE ASSETS (CONTINUED)

Impairment testing for cash-generating units (“CGU”) containing intangible assets

For the purpose of impairment testing, brands and other intangible assets with indefinite useful lives are allocated to the
Group’s manufacturing and distribution units which represent the lowest level within the Group at which the intangible
assets are monitored for internal management purpose.

The aggregate carrying amount of the intangible assets allocated to each unit are as follows:

Goodwill Brands Other intangible assets

2020 2019 2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Pasante Healthcare Limited
(“Pasante”) 27,230 27,230 - - - -
“ONE” brand manufacturing and
distribution - - 27,425 26,471 - -
“Trustex” brand manufacturing
and distribution - - 34,100 34,100 - -
“NüVo” brand manufacturing and
distribution - - 848 818 - -
Other intangible assets related to
fitted condom - - - - 5,589 5,589
Other intangible assets related to
former production - - - - 358 358
27,230 27,230 62,373 61,389 5,947 5,947

Goodwill

Goodwill was generated upon acquisition of Pasante. The recoverable amount for goodwill were based on its value in use,
determined by discounting the future cash flows to be generated from the CGU and were based on the following key assumptions:

i) Cash flows were projected based on 10-year plan and an estimated terminal value.

ii) Revenue were projected based on growth rate of 4.00% - 10.00% on historical sales performance.

iii) Profit margins were based on the historical performance of the distribution units and remain constant throughout
the projected period.

iv) A pre-tax discount rate of 11.8% was applied in determining the recoverable amount of the unit. The discount rate
was estimated based on the industry’s weighted average cost of capital.

Brands

The recoverable amount for Brands were based on their value in use, determined by discounting the future cash flows
to be generated from the CGU and were based on the following key assumptions:

i) Cash flows were projected based on 10-year plan and an estimated terminal value.

ii) Revenue were projected based on adult population that uses condom of the target territories.

iii) Profit margins were based on the historical performance of the manufacturing and distribution units and remain
constant throughout the projected period.

iv) Pre-tax discount rates of 12.3% to 12.7% were applied in determining the recoverable amount of the units.
The discount rates were estimated based on the industry’s weighted average cost of capital.
Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))
 FINANCIAL STATEMENTS 105

Notes to the Financial Statements

6. INTANGIBLE ASSETS (CONTINUED)

Other intangible assets related to fitted condoms

The recoverable amount for the other intangible assets were based on its value in use, determined by discounting the
future cash flows to be generated from the CGU and were based on the following key assumptions:

i) Cash flows were projected based on 10-year plan and an estimated terminal value.

ii) Revenue was projected based on adult population that uses condom of the target territories.

iii) Profit margin was based on the historical performance of the manufacturing and distribution units and remain
constant throughout the projected period.

iv) A pre-tax discount rate of 12.6% was applied in determining the recoverable amount of the unit. The discount rate
was estimated based on the industry’s weighted average cost of capital.

The value assigned to the key assumptions represents management’s assessment of future trends in the industry and
are based on both internal and external sources.

Based on the management assessment, no impairment is required as the recoverable amount was higher than carrying
amount of the above intangible assets.

The following table shows the reduction of recoverable amount with the changes in the key assumptions which are
particularly sensitive:
1 percentage point 1 percentage point 1 percentage point
change in change in change in
revenue growth gross profit margin discount rate
2020 2019 2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Pasante 5,992 4,419 2,660 5,376 5,339 3,124
“ONE” brand manufacturing and
distribution 2,025 1,008 6,008 7,726 13,479 14,151
“Trustex” brand manufacturing
and distribution 2,526 3,462 1,129 1,182 5,378 5,717
“NüVo” brand manufacturing and
distribution 153 225 117 117 283 302
Other intangible assets related to
fitted condom 1,185 1,122 329 360 883 1,078

Based on sensitivity analysis, management concluded that there are no reasonably foreseeable changes in any of the
above key assumptions would cause the carrying values of goodwill, brands and other intangible assets to exceed its
recoverable amounts.

The comparative figures for 1 percentage point change in revenue growth have been restated to conform with
current year’s presentation. Basis of calculation has been revised to a compounding year over year basis instead of
straight-line basis.

There is no further disclosure on other intangible assets related to former production as the amount is not significant
to the Group.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

106 FINANCIAL STATEMENTS

Notes to the Financial Statements

7. DEFERRED TAX ASSETS/(LIABILITIES)

Recognised deferred tax assets/(liabilities)

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities Net
2020 2019 2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Property, plant and equipment - 189 (11,336) (10,934) (11,336) (10,745)
Unutilised business losses 3,093 1,637 - - 3,093 1,637
Unutilised capital allowances 3,059 1,572 - - 3,059 1,572
Inventories 1,361 689 - - 1,361 689
Trade receivables 985 616 - - 985 616
Assets and liabilities not currently
deductible/taxable for tax
purposes 5,378 - (8,588) - (3,210) -
Others 558 114 (24) (33) 534 81
Tax assets/(liabilities) 14,434 4,817 (19,948) (10,967) (5,514) (6,150)
Set off of tax (12,709) (2,903) 12,709 2,903 - -
Net tax assets/(liabilities) 1,725 1,914 (7,239) (8,064) (5,514) (6,150)

Movement in temporary differences during the year

Recognised in
At profit or loss At
1 July 2019 (Note 19) 30 June 2020
RM’000 RM’000 RM’000
Group
Property, plant and equipment (10,745) (591) (11,336)
Unutilised business losses 1,637 1,456 3,093
Unutilised capital allowance 1,572 1,487 3,059
Inventories 689 672 1,361
Trade receivables 616 369 985
Assets and liabilities not currently deductible/taxable for tax
purpose - (3,210) (3,210)
Others 81 453 534
(6,150) 636 (5,514)

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 107

Notes to the Financial Statements

7. DEFERRED TAX ASSETS/(LIABILITIES) (CONTINUED)

Movement in temporary differences during the year (continued)

Recognised in
At profit or loss At
1 July 2018 (Note 19) 30 June 2019
RM’000 RM’000 RM’000
Group
Property, plant and equipment (10,263) (482) (10,745)
Unutilised business losses 468 1,169 1,637
Unutilised capital allowance - 1,572 1,572
Inventories 1,439 (750) 689
Trade receivables 237 379 616
Others 685 (604) 81
(7,434) 1,284 (6,150)

The unutilised business losses are available for offsetting against future taxable profits of the respective entities within
the Group, subject to guidelines issued by the respective tax authority as follows:
Group
2020 2019
RM’000 RM’000
Within 5 years of recognition 988 1,637
Within 7 years of recognition 2,028 -
Within 20 years of recognition 77 -
3,093 1,637

Unutilised capital allowances do not expire under respective tax authority.

8. INVENTORIES
Group
2020 2019
RM’000 RM’000
Raw materials 39,623 30,685
Work-in-progress 33,664 33,017
Finished goods 53,543 54,435
Chemicals and factory supplies 2,054 1,491
128,884 119,628

Carrying amount:
- At cost 122,698 116,309
- At net realisable value 6,186 3,319
128,884 119,628

Recognised in profit or loss:

- Inventories recognised as cost of sales 304,050 288,379
- Allowance for/(Reversal of) slow-moving 2,233 (5)
- Written off 106 104
- Written down to net realisable value 975 818

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

108 FINANCIAL STATEMENTS

Notes to the Financial Statements

9. TRADE AND OTHER RECEIVABLES

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Trade
Trade receivables 83,214 68,208 - -

Non-trade
Other receivables 3,897 5,076 - 3
Deposits 936 1,979 - -
Prepayments 7,330 7,022 - -
Due from subsidiaries - - 59,122 56,891
12,163 14,077 59,122 56,894
95,377 82,285 59,122 56,894

The amounts due from subsidiaries are unsecured, subject to interest at 5% (2019: 5%) per annum and repayable upon
demand.

Included in prepayments is advance payment made to suppliers amounting to RM1,638,000 (2019: RM379,000).

10. CONTRACT ASSETS

The contract assets primarily relate to the Group’s rights to consideration for work completed on condoms but not yet
billed at the reporting date. Typically, the amount will be billed upon delivery and payment is expected within 90 days.

11. CASH AND CASH EQUIVALENTS

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Cash and bank balances 40,253 41,434 5,999 2,415
Short-term deposits 6,088 22,201 4,764 20,809
Cash and cash equivalents in the
statements of financial position 46,341 63,635 10,763 23,224
Less: Pledged deposits (1,324) (1,392) - -
Cash and cash equivalents in the
statements of cash flows 45,017 62,243 10,763 23,224

Included in short-term deposits of the Group are RM1,324,000 (2019: RM1,392,000) pledged to bank as security for
bank guarantee granted to the Group.

12. ASSETS CLASSIFIED AS HELD FOR SALE

The assets classified as held for sale consist of a piece of land with a carrying amount of RM281,000. The Group
entered into an agreement to dispose the property for a consideration of RM617,000 on 23 January 2020. The disposal
has yet to be completed as at year end.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 109

Notes to the Financial Statements

13. CAPITAL AND RESERVES

Share capital

Group/Company Group/Company
Number of ordinary shares
2020 2019 2020 2019
RM’000 RM’000 ’000 ’000
Issued and fully paid shares with no par value
classified as equity instruments:
Ordinary shares 281,980 281,980 1,002,375 1,002,375

Reserves
Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Distributable
Retained earnings 115,991 130,799 6,805 16,022

Non-distributable
Merger reserve 63,511 63,511 63,511 63,511
Translation reserve 17,949 14,024 - -
Other reserve 718 718 - -
198,169 209,052 70,316 79,533

Ordinary shares

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one
vote per share at meetings of the Company.

Merger reserve

The merger reserve comprises of the differences between the cost of acquisition and the nominal value of shares
acquired together with any other reserves of the combining entities during the restructuring among common shareholders
as stated in the accounting policy Note 2(a)(iv).

Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements
of foreign operations.

Other reserve

Based on Thailand Law, the other reserve comprises of reserve fund allocated at each distribution of dividend, being at
least 5% of the profit until it reaches 10% of the registered capital of a foreign subsidiary, and claimable upon disposal
or liquidation of the foreign subsidiary by the Group. The legal reserve is not available for dividend distribution.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

110 FINANCIAL STATEMENTS

Notes to the Financial Statements

14. LOANS AND BORROWINGS

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Non-current
Secured
Term loans 4,540 8,525 - 828
Finance lease liabilities - 531 - -
Hire purchase liabilities 406 - - -
4,946 9,056 - 828

Current
Secured
Term loans 7,090 7,227 857 1,157
Bankers’ acceptances 15,674 13,530 - -
Finance lease liabilities - 276 - -
Hire purchase liabilities 203 - - -
22,967 21,033 857 1,157

Unsecured
Trust receipt 805 475 - -
Export financing 2,389 789 - -
Revolving credit 535 1,963 - -
Foreign currency trade loan - 352 - -
3,729 3,579 - -
26,696 24,612 857 1,157
31,642 33,668 857 1,985

The loans and borrowings are secured by:

i) Fixed and floating charges over the Group’s certain assets as disclosed in Note 3; and
ii) Corporate guarantee by the Company.

Significant covenants
The borrowings of a subsidiary of the Group, Karex Industries Sdn. Bhd. is subject to the following covenants:
a. Maintain gearing ratios of not more than 1.5 times or 2.0 times or 3.5 times as defined by the respective financial
institutions.
b. Net tangible worth of the said subsidiary shall not be less than RM40,000,000.
c. The said subsidiary shall not without the banks’ prior written consent, incur or assume additional indebtedness
or guarantee any indebtedness (except in the ordinary course of business), alter the present ownership structure
and extend loans and advances to the Directors of the Company and its related companies.
d. The said subsidiary shall not without the banks’ prior written consent, declare and pay dividend exceeding 50% of
the profit after tax of each financial year.

The said subsidiary has complied with the above loan covenants.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 111

Notes to the Financial Statements

14. LOANS AND BORROWINGS (CONTINUED)

Finance lease liabilities

Finance lease liabilities (secured) are payable as follows:

2019
Future Present value
minimum of minimum
lease lease
payments Interest payments
RM’000 RM’000 RM’000
Group
Less than one year 306 30 276
Between one and five years 565 34 531
871 64 807

15. TRADE AND OTHER PAYABLES

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Trade
Trade payables 48,948 35,864 - -

Non-trade
Other payables and accrued expenses 27,357 24,475 323 184
76,305 60,339 323 184

Included in other payables and accrued expenses of the Group are RM8,377,000 (2019: RM6,231,000) in respect of
advances received from customers.

16. DERIVATIVE FINANCIAL LIABILITIES

2020 2019
Nominal Financial Nominal Financial
value liabilities value liabilities
RM’000 RM’000 RM’000 RM’000
Group
Derivatives at fair value through profit or loss
- Forward exchange contracts 93,072 361 92,705 3

Forward exchange contracts are used to manage the foreign currency exposures arising from the Group’s receivables
and payables denominated in currencies other than the functional currency of the Group. Most of the forward exchange
contracts have maturities of less than one year after the end of the reporting period. Where necessary, the forward
contracts are rolled over at maturity.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

112 FINANCIAL STATEMENTS

Notes to the Financial Statements

17. REVENUE

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Revenue from contracts with customers 395,067 378,484 - -
Other revenue
- Dividend income - - 5,000 6,500
Total revenue 395,067 378,484 5,000 6,500

17.1 Disaggregation of revenue

Reportable segments
Sexual wellness Medical Others Total
2020 2019 2020 2019 2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Primary
geographical
markets
Asia 78,484 90,669 13,618 13,981 - - 92,102 104,650
Africa 99,098 98,635 27 551 - - 99,125 99,186
Americas 130,064 108,425 1,239 1,598 - - 131,303 110,023
Europe 54,101 46,697 10,985 11,769 7,451 6,159 72,537 64,625
361,747 344,426 25,869 27,899 7,451 6,159 395,067 378,484

Major products
and service
lines
Condoms 351,665 329,932 - - - - 351,665 329,932
Personal
lubricants 6,769 11,697 - - - - 6,769 11,697
Probe covers - - 7,358 7,725 - - 7,358 7,725
Catheters - - 15,579 16,114 - - 15,579 16,114
Other 3,313 2,797 2,932 4,060 7,451 6,159 13,696 13,016
361,747 344,426 25,869 27,899 7,451 6,159 395,067 378,484

Timing and
recognition
At a point in time 357,679 338,730 25,869 27,899 7,451 6,159 390,999 372,788
Over time 4,068 5,696 - - - - 4,068 5,696
361,747 344,426 25,869 27,899 7,451 6,159 395,067 378,484

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 113

Notes to the Financial Statements

17. REVENUE (CONTINUED)

17.2 Nature of goods and services

The following information reflects the typical transactions of the Group:

Timing of recognition or method

Nature of goods or services
Condoms, personal lubricants,
probe covers, catheters and
other healthcare products
Made-to order products
used to recognise revenue
Revenue is recognised at a point in
time when the control over a product
or service is delivered and accepted by
the customer
Revenue is recognised over time as
costs are incurred. The work performed
does not create an alternative use to
the Group and the Group has rights to
payment for work performed
Significant payment terms
Credit period of 0 to 120 days
from invoice date
Credit period of 90 days from
invoice date/upon shipment of
goods

The Group applies the practical expedient for exemption on disclosure of information on remaining performance
obligation that have original expected durations of one year or less.

The revenue from contracts with customers of the Group are not subject to variable element in the consideration,
obligation for returns or refunds and warranty.

18. FINANCE COSTS

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Interest expense of financial liabilities that are
not at fair value through profit or loss 1,483 1,424 51 117
Interest expenses on lease liabilities 1,007 - - -
2,490 1,424 51 117

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

114 FINANCIAL STATEMENTS

Notes to the Financial Statements

19. TAX EXPENSE

Recognised in profit or loss

Major components of income tax expense include:

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Current tax expense
- Current year 2,481 2,568 349 528
- Prior years (141) (537) 1 (62)
2,340 2,031 350 466

Deferred tax income

- Origination and reversal of temporary
differences (822) (1,316) - -
- Prior years 186 32 - -
(636) (1,284) - -
1,704 747 350 466

Reconciliation of tax expense

Profit before tax 5,192 3,804 6,169 8,710

Income tax calculated using Malaysian tax rate

of 24% 1,246 913 1,481 2,090
Non-deductible expenses 879 602 383 298
Non-taxable income (603) (313) (1,515) (1,860)
Effect of different tax rates in different
jurisdictions 366 60 - -
Tax incentives (229) (10) - -
1,659 1,252 349 528
Prior years 45 (505) 1 (62)
Tax expense 1,704 747 350 466

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 115

Notes to the Financial Statements

20. PROFIT FOR THE YEAR

Group Company
2020 2019 2020 2019
Note RM’000 RM’000 RM’000 RM’000
Profit for the year is arrived at after
charging/(crediting)
Audit fees
- KPMG PLT 292 290 85 85
- Overseas affiliate of KPMG PLT 108 108 - -
- Other auditors 348 341 - -

Non-audit fees
- KPMG PLT 17 20 17 20

Depreciation and amortisation:

- Property, plant and equipment 16,699 15,530 - -
- Right-of-use assets 3,924 - - -
- Intangible assets 202 123 - -

Expenses relating to short-term leases a 2,118 - - -

Expenses relating to leases of low-value
assets a 71 - - -
Fair value loss on derivative instruments 361 3 - -
Finance income (517) (1,018) (2,657) (3,730)
Net foreign exchange (gain)/loss (2,393) 809 (315) (35)
Impairment loss/(Reversal of impairment
loss) on trade receivables 46 (88) - -

Inventories:
- Allowance for/(Reversal of) slow moving 2,233 (5) - -
- Written off 106 104 - -
- Written down to net realisable value 975 818 - -

Personnel expenses (including key

management personnel):
- Contributions to state plans 4,544 3,731 - -
- Wages, salaries and others 102,328 97,223 640 587

Property, plant and equipment:

- Gain on disposal (23) (217) - -
- Written off 81 157 - -

Rental expense - 4,972 - -

Note a

The Group leases a number of hostels and equipment with contract terms of 1 to 4 years. These leases are short-term
and/or leases of low-value items. The Group has elected not to recognise right-of-use assets and lease liabilities for
these leases.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

116 FINANCIAL STATEMENTS

Notes to the Financial Statements

21. EARNINGS PER ORDINARY SHARE

Basic earnings per ordinary share

The calculation of basic earnings per ordinary share at 30 June 2020 was based on the profit attributable to ordinary
shareholders and a weighted average number of ordinary shares outstanding, calculated as follows:

Group
2020 2019
RM’000 RM’000
Profit for the year attributable to owners of the Company 228 2,533

Weighted average number of ordinary shares

Weighted average number of ordinary shares at 30 June (’000) 1,002,375 1,002,375

Basic earnings per ordinary share (sen) 0.02 0.25

Diluted earnings per ordinary share

The diluted earnings per share is the same as basic earnings per share as there are no dilutive potential ordinary shares
outstanding.

22. DIVIDENDS

Dividends recognised by the Company are:

Sen Total amount

per share RM’000 Date of payment
2020
Final dividend 2019 1.0 10,024 23 December 2019
Interim dividend 2020 0.5 5,012 25 March 2020
15,036

2019
Dividend 2018 0.5 5,012 20 December 2018

After the reporting period, the following final single-tier dividend was proposed by the Directors. The dividend will be
recognised in subsequent financial period upon approval by the owners of the Company at the forthcoming Annual
General Meeting.
Sen Total amount
per share RM’000
Final 2020 0.5 5,012

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 117

Notes to the Financial Statements

23. ACQUISITION OF PROPERTY, PLANT AND EQUIPMENT

Acquisition of property, plant and equipment in statement of cash flows represents:

Group
2020 2019
RM’000 RM’000
Current year additions 23,083 18,977
Add/(Less):
- Amount financed by hire purchase liabilities (179) -
- Amount financed by finance lease - (313)
- Balances in respect of acquisition of property,
plant and equipment included in other creditors:
- at end of year (832) (2,114)
- at beginning of year 2,114 1,889
- Interest capitalised - (195)
Cash from acquisition of property, plant and equipment 24,186 18,244

24. OPERATING SEGMENTS

Group

The Group’s main business activities comprise investment holding, manufacture and sale of sexual wellness, medical
and other health related products. These activities are principally located in Malaysia, Thailand, United States of
America and Europe. Inter-segment pricing is determined based on negotiated terms.

Performance is measured based on segment profit before tax and interest, as included in the internal management
reports that are reviewed by the Chief Executive Officer (“CEO”), who is the Group’s chief operating decision maker.
Segment profit is used to measure performance as management believes that such information is the most relevant in
evaluating the results of certain segments relative to other entities that operate within these industries.

Segment assets

The total of segment asset is measured based on all assets of a segment, as included in the internal management
reports that are reviewed by the CEO. Segment total asset is used to measure the return of assets of each segment.

Segment liabilities

Segment liabilities information is neither included in the internal management reports nor provided regularly to the CEO.
Hence, no disclosure is made on segment liability.

Segment capital expenditure

Segment capital expenditure is the total cost incurred during the financial year to acquire property, plant and equipment
and intangible assets other than goodwill.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

118 FINANCIAL STATEMENTS

Notes to the Financial Statements

24. OPERATING SEGMENTS (CONTINUED)

Segment capital expenditure (Continued)

Sexual
wellness Medical Others Total
RM’000 RM’000 RM’000 RM’000
2020
Segment profit 6,494 1,344 760 8,598

Included in the measure of segment profit are:

Revenue from external customers 361,747 25,869 7,451 395,067
Inventories:
- Allowance for slow moving (2,163) (70) - (2,233)
- Written off (106) - - (106)
- Written down to net realisable value (975) - - (975)
Depreciation and amortisation (20,589) (228) (8) (20,825)

Not included in the measure of

segment profit but provided to CEO:
Finance income 48 - - 48
Finance costs (2,405) (32) (2) (2,439)

Segment assets 576,561 29,650 4,549 610,760

Not included in the measure of

segment assets are:
Additions to non-current assets other than
financial instruments and deferred tax assets 22,720 363 - 23,083

2019
Segment profit 2,551 2,954 239 5,744

Included in the measure of segment profit are:

Revenue from external customers 344,426 27,899 6,159 378,484
Inventories:
- Reversal of allowance for slow moving 5 - - 5
- Written off (104) - - (104)
- Written down to net realisable value (818) - - (818)
Depreciation and amortisation (15,465) (186) (2) (15,653)

Not included in the measure of

segment profit but provided to CEO:
Finance income 96 1 - 97
Finance costs (1,268) (34) (5) (1,307)

Segment assets 538,096 29,035 4,679 571,810

Not included in the measure of

segment assets are:
Additions to non-current assets other than
financial instruments and deferred tax assets 18,712 265 - 18,977

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 119

Notes to the Financial Statements

24. OPERATING SEGMENTS (CONTINUED)

Reconciliations of reportable segment revenues, profit or loss, assets and other material items:
Group
2020 2019
RM’000 RM’000
Profit or loss
Total profit for reportable segments 8,598 5,744
Finance costs (2,439) (1,307)
Finance income 48 97

Unallocated items:
- Corporate expenses (1,433) (1,534)
- Finance income from deposits with licensed banks and other corporation 469 921
- Finance costs (51) (117)
Consolidated profit before tax 5,192 3,804

Total assets
Total assets for reportable segments 610,760 571,810
Other non-reportable segments 11,064 23,286
Consolidated total assets 621,824 595,096

Geographical segments

The sexual wellness and medical segments are managed on a worldwide basis, but operate manufacturing facilities
and sales offices in Malaysia, Thailand, United Kingdom and the United States of America.

In presenting information on the basis of geographical segments, segment revenue is based on geographical destination
markets of the export for the financial years.

Geographical segment non-current assets information is neither included in the internal management reports nor
provided regularly to the CEO. Hence, no disclosure is made on geographical segment non-current assets.

Geographical revenue

Geographical segment revenue is as disclosed in Note 17.1.

Major customers

There is no significant concentration of sales to a customer exceeding 10% of the Group’s revenue for year 2020 and
2019.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

120 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS

25.1 Categories of financial instruments

The table below provides an analysis of financial instruments categorised as follows:

(a) Amortised cost (“AC”)

(b) Fair value through profit or loss (“FVTPL”)
- Mandatorily required by MFRS 9
Carrying Mandatorily
amount AC at FVTPL
RM’000 RM’000 RM’000
Group
2020
Financial assets
Trade and other receivables 88,047 88,047 -
Contract assets 316 316 -
Cash and cash equivalents 46,341 46,341 -
134,704 134,704 -

Financial liabilities
Trade and other payables (67,928) (67,928) -
Loans and borrowings (31,642) (31,642) -
Derivative financial liabilities (361) - (361)
(99,931) (99,570) (361)

2019
Financial assets
Trade and other receivables 75,263 75,263 -
Contract assets 500 500 -
Cash and cash equivalents 63,635 63,635 -
139,398 139,398 -

Financial liabilities
Trade and other payables (54,108) (54,108) -
Loans and borrowings (33,668) (33,668) -
Derivative financial liabilities (3) - (3)
(87,779) (87,776) (3)

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 121

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.1 Categories of financial instruments (continued)

Carrying Mandatorily
amount AC at FVTPL
RM’000 RM’000 RM’000
Company
2020
Financial assets
Trade and other receivables 59,122 59,122 -
Cash and cash equivalents 10,763 10,763 -
69,885 69,885 -

Financial liabilities
Trade and other payables (323) (323) -
Loans and borrowings (857) (857) -
(1,180) (1,180) -

2019
Financial assets
Trade and other receivables 56,894 56,894 -
Cash and cash equivalents 23,224 23,224 -
80,118 80,118 -

Financial liabilities
Trade and other payables (184) (184) -
Loans and borrowings (1,985) (1,985) -
(2,169) (2,169) -

25.2 Net gains and losses arising from financial instruments

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Net (losses)/gains on:
Financial liabilities at amortised cost (1,483) (1,424) (51) (117)
Financial assets at amortised cost 2,864 297 2,972 3,765
Financial liabilities at fair value through
profit or loss
- Mandatorily required by MFRS 9 (361) (3) - -
1,020 (1,130) 2,921 3,648

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

122 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.3 Financial risk management

The Group has exposure to the following risks from its financial instruments:

• Credit risk
• Liquidity risk
• Market risk

25.4 Credit risk

Credit risk is the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group’s and the Company’s exposure to credit risk arises principally from its
receivables from customers and subsidiaries. There are no significant changes as compared to prior period.

Trade receivables and contract assets

Risk management objectives, policies and processes for managing the risk

Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis.
Normally credit evaluations are performed on customers requiring credit over a certain amount.

At each reporting date, the Group assesses whether any of the trade receivables and contract assets are credit
impaired.

The gross carrying amounts of credit impaired trade receivables and contract assets are written off (either partially
or full) when there is no realistic prospect of recovery. This is generally the case when the Group determines
that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the
amounts subject to the write-off. Nevertheless, trade receivables and contract assets that are written off could still
be subject to enforcement activities.

There are no significant changes as compared to prior period.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, there were no significant concentrations of credit risk and the maximum exposure
to credit risk arising from receivables is represented by the carrying amounts in the statement of financial position.

Recognition and measurement of impairment loss

In managing credit risk of trade receivables and contract assets, the Group manages its debtors and takes
appropriate actions (including but not limited to legal actions) to recover long overdue balances.

The Group assessed the risk of loss of the customer individually based on their financial information, past trend
of payments and external credit ratings, where applicable. Invoices which are aged more than 365 days will be
considered as credit impaired.

The following table provides information about the exposure to credit risk and expected credit losses (“ECLs”) for
trade receivables and contract assets as at the end of the reporting period which are grouped together as they are
expected to have similar risk nature.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 123

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.4 Credit risk (continued)

Trade receivables and contract assets (continued)

Recognition and measurement of impairment loss (continued)

Gross
carrying Loss
amount allowance Net balance
RM’000 RM’000 RM’000
Group
2020
Current (not past due) 49,701 - 49,701
1 - 30 days past due 8,490 - 8,490
31 - 60 days past due 7,217 - 7,217
61 - 90 days past due 1,878 - 1,878
More than 90 days past due 16,244 - 16,244
83,530 - 83,530

Credit impaired
Individually impaired 201 201 -
83,731 201 83,530

Trade receivables 83,415 201 83,214

Contract assets 316 - 316
83,731 201 83,530

2019
Current (not past due) 47,878 - 47,878
1 - 30 days past due 11,678 - 11,678
31 - 60 days past due 5,750 - 5,750
61 - 90 days past due 792 - 792
More than 90 days past due 2,610 - 2,610
68,708 - 68,708

Credit impaired
Individually impaired 591 591 -
69,299 591 68,708

Trade receivables 68,799 591 68,208

Contract assets 500 - 500
69,299 591 68,708

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

124 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.4 Credit risk (continued)

Trade receivables and contract assets (continued)

Recognition and measurement of impairment loss (continued)

The movements in the allowance for impairment in respect of trade receivables during the year are shown below.
Group
2020 2019
RM’000 RM’000
Credit impaired
Balance as at 1 July 591 679
Net remeasurement of loss allowance 46 (88)
Amounts written off (436) -
Balance as at 30 June 201 591

Inter-company balances
Risk management objectives, policies and processes for managing the risk
The Company’s exposure to credit risk arose from unsecured advances provided to its subsidiaries.

The Company monitors the financial positions of subsidiaries in assessing its credit risk.

Exposure to credit risk, credit quality and collateral

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying
amounts in the statement of financial position.

Recognition and measurement of impairment loss

Generally, the Company considers amounts due from subsidiaries have low credit risk. The Company assumes
that there is a significant increase in credit risk when the subsidiaries’ financial position deteriorates significantly.
The Company considers amounts due from subsidiaries to be credit impaired when:
• The subsidiaries are unlikely to repay the amount to the Company in full; or
• The subsidiaries are continuously loss making and is having a deficit shareholders’ fund.

The Company determines the probability of default for this amount individually using internal information available.

At the end of the reporting period, there is no indication that the financial positions of the subsidiaries have
deteriorated significantly. There is no subsidiary which is unlikely to repay its amount to the Company in full and
in deficit shareholders’ fund.

Cash and cash equivalents

The cash and cash equivalents are held with banks and financial institutions. As at the end of the reporting
period, the maximum exposure to credit risk is represented by their carrying amounts in the statement of financial
position.

These banks and financial institutions have low credit risks. In addition, some of the bank balances are insured by
government agencies. Consequently, the Group and the Company are of the view that the loss allowance is not
material and hence, it is not provided for.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 125

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.4 Credit risk (continued)

Other receivables

The Group and the Company monitor the exposure to credit risk on individual basis.

As at the end of the reporting period, the maximum exposure to credit risk is represented by their carrying
amounts in the statement of financial position and the Group and the Company do not recognise any allowance
for impairment losses.

Financial guarantees

Risk management objectives, policies and processes for managing the risk

The Company provides unsecured financial guarantees to banks in respect of banking facilities granted to
subsidiaries. The Company monitors on an ongoing basis the results of its subsidiaries and repayments made by
its subsidiaries.

Exposure to credit risk, credit quality and collateral

The Company’s maximum exposure to credit risk amounts to RM27,444,000 (2019: RM30,561,000) representing
the outstanding banking facilities of its subsidiaries as at the end of the reporting period.

Recognition and measurement of impairment loss

The Company determines the probability of default for the guaranteed loans using internal information available
by assessing individual subsidiary’s financial position and likelihood to repay the loan.

As at the end of the reporting period, there was no indication that these subsidiaries would default on repayment.

The financial guarantees have not been recognised since the fair value on initial recognition was not material.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

126 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.5 Liquidity risk

Liquidity risk is the risk that the Group and the Company will not be able to meet its financial obligations as they fall
due. The Group’s and the Company’s exposure to liquidity risk arises principally from its various payables, loans
and borrowings.

The Group and the Company maintain a level of cash and cash equivalents and bank facilities deemed adequate by
the management to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when they fall due.

It is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at
significantly different amounts.

Maturity analysis

The table below summarises the maturity profile of the Group’s and of the Company’s financial liabilities and lease
liabilities as at the end of the reporting period based on undiscounted contractual payments:

Contractual
interest
rate/
coupon/ Contractual
Carrying Discount cash Under More than
amount rate flows 1 year 1 - 2 years 2 - 5 years 5 years
RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000
Group
2020
Non-derivative financial
liabilities
Trade and other payables 67,928 - 67,928 67,928 - - -
Secured term loans 11,630 2.41 - 5.94 11,998 7,187 3,396 856 559
Secured hire purchase
liabilities 609 2.90 - 4.39 651 226 328 97 -
Secured bankers’
acceptances 15,674 3.00 - 4.25 15,674 15,674 - - -
Unsecured export financing 2,389 3.47 2,389 2,389 - - -
Unsecured revolving credit 535 4.35 535 535 - - -
Unsecured trust receipt 805 3.73 805 805 - - -
Lease liabilities 20,875 3.70 - 4.50 27,429 4,236 4,199 6,619 12,375
120,445 127,409 98,980 7,923 7,572 12,934

Derivative financial liabilities

Forward exchange contracts
(gross settled):
Outflow 361 - 93,433 93,433 - - -
Inflow - - (93,072) (93,072) - - -
120,806 127,770 99,341 7,923 7,572 12,934

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 127

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.5 Liquidity risk (continued)

Maturity analysis (continued)

Contractual
interest
rate/
coupon/ Contractual
Carrying Discount cash Under More than
amount rate flows 1 year 1 - 2 years 2 - 5 years 5 years
RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000
Group
2019
Non-derivative financial
liabilities
Trade and other payables 54,108 - 54,108 54,108 - - -
Secured term loans 15,752 3.48 - 6.17 16,113 7,210 4,307 3,765 831
Secured finance lease
liabilities 807 2.90 - 4.22 871 306 276 289 -
Secured bankers’
acceptance 13,530 3.41 - 4.35 13,530 13,530 - - -
Unsecured export financing 789 3.50 789 789 - - -
Unsecured revolving credit 1,963 4.35 1,963 1,963 - - -
Unsecured trust receipt 475 3.61 475 475 - - -
Foreign currency trade loan 352 1.98 352 352 - - -
87,776 88,201 78,733 4,583 4,054 831

Derivative financial liabilities

Forward exchange contracts
(gross settled):
Outflow 3 - 92,708 92,708 - - -
Inflow - - (92,705) (92,705) - - -
87,779 88,204 78,736 4,583 4,054 831

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128 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.5 Liquidity risk (continued)

Maturity analysis (continued)

Contractual
interest
rate/
coupon/ Contractual
Carrying Discount cash Under More than
amount rate flows 1 year 1 - 2 years 2 - 5 years 5 years
RM’000 % RM’000 RM’000 RM’000 RM’000 RM’000
Company
2020
Non-derivative financial
liabilities
Trade and other payables 323 - 323 323 - - -
Secured term loans 857 2.41 871 871 - - -
Financial guarantee* - - 27,444 27,444 - - -
1,180 28,638 28,638 - - -

2019
Non-derivative financial
liabilities
Trade and other payables 184 - 184 184 - - -
Secured term loans 1,985 3.48 2,052 1,211 841 - -
Financial guarantee* - - 30,561 30,561 - - -
2,169 32,797 31,956 841 - -

* The amount represents the outstanding banking facilities of the subsidiaries at the end of the reporting
period.

25.6 Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates that will
affect the Group’s and the Company’s financial position or cash flows.

Currency risk

The Group is exposed to foreign currency risk on sales and purchases that are denominated in a currency other
than the functional currency of the Group. The currencies giving rise to this risk are primarily US Dollar (“USD”),
Chinese Yuan (“CNY”), Euro (“EUR”) and Great Britain Pound (“GBP”).

Risk management objectives, policies and processes for managing the risk

The Group uses forward exchange contracts to hedge its foreign currency risk from time to time. Most of the
forward exchange contracts have maturities of less than one year after the end of the reporting period. Where
necessary, the forward exchange contracts are rolled over at maturity.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 129

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.6 Market risk (continued)

Currency risk (continued)

Exposure to foreign currency risk

The Group’s exposure to foreign currency (a currency which is other than the functional currency of Group entities)
risk, based on carrying amounts as at the end of the reporting period was:

Denominated in
USD CNY EUR GBP
RM’000 RM’000 RM’000 RM’000
Group
2020
Trade receivables 55,310 4,396 282 -
Intercompany receivables 53,500 - 37 4,217
Cash and cash equivalents 8,560 3 392 154
Trade payables (10,514) - (1,000) (27)
Other payables (1,455) - (89) -
Intercompany payables (32,786) - - (14)
Loans and borrowings (10,262) - - -
Forward exchange contracts (93,072) - - -
Net exposure (30,719) 4,399 (378) 4,330

2019
Trade receivables 36,275 7,895 58 -
Intercompany receivables 54,599 - - 6,522
Cash and cash equivalents 9,481 3 233 221
Trade payables (6,085) - (8) (1)
Other payables (1,993) - - -
Intercompany payables (34,689) - - -
Loans and borrowings (12,079) - - -
Forward exchange contracts (92,705) - - -
Net exposure (47,196) 7,898 283 6,742

Denominated in USD
2020 2019
RM’000 RM’000
Company
Intercompany receivables 10,111 2,339
Loans and borrowings (857) (1,985)
Net exposure 9,254 354

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130 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.6 Market risk (continued)

Currency risk (continued)

Currency risk sensitivity analysis

A 10% (2019: 10%) strengthening of the Ringgit Malaysia (“RM”) against the following currencies at the end of
the reporting period would have decreased post-tax profit or loss by the amounts shown below. This analysis
assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted
sales and purchases.

Denominated in
USD CNY EUR GBP
RM’000 RM’000 RM’000 RM’000
Group
2020
Profit or (loss) 2,335 (334) 29 (329)
2019
Profit or (loss) 3,587 (600) (22) (512)

Denominated in USD
2020 2019
RM’000 RM’000
Company
Profit or (loss) (703) (27)

A 10% (2019: 10%) weakening of the RM against the above currencies at the end of the reporting period would
have had equal but opposite effect on the above currencies to the amounts shown above, on the basis that all
other variables remain constant.

Interest rate risk

The Group’s fixed rate borrowings are exposed to a risk of change in their fair value due to changes in interest
rates. The Group’s variable rate borrowings are exposed to a risk of change in cash flows due to changes in
interest rates. Short term receivables and payables are not significantly exposed to interest rate risk.

Risk management objectives, policies and processes for managing the risk

There is no formal hedging policy with respect to interest rate exposure. Exposure to interest rate is monitored on
an ongoing basis and the Group endeavours to keep the exposure at an acceptable level.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 131

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.6 Market risk (continued)

Interest rate risk (continued)

Exposure to interest rate risk

The interest rate profile of the Group’s and the Company’s significant interest-bearing financial instruments and
lease liabilities, based on carrying amounts as at the end of the reporting period was:

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
Fixed rate instruments
Financial assets 6,088 22,201 63,886 77,700
Financial liabilities (20,012) (17,916) - -
Lease liabilities (20,875) - - -
(34,799) 4,285 63,886 77,700

Floating rate instruments

Financial liabilities (11,630) (15,752) (857) (1,985)

Interest rate risk sensitivity analysis

(a) Fair value sensitivity analysis for fixed rate instruments

The Group and the Company do not account for any fixed rate financial assets and liabilities at fair value
through profit or loss, and the Group and the Company do not designate derivatives as hedging instruments
under a fair valued hedged accounting model. Therefore, a change in interest rates at the end of the reporting
period would not affect profit or loss.

(b) Cash flow sensitivity analysis for variable rate instruments

A change of 100 basis points (“bp”) in interest rates at the end of the reporting period would have increased/
(decreased) the Group and the Company post-tax results by RM88,000 (2019: RM120,000) and RM7,000
(2019: RM15,000) respectively. This analysis assumes that all other variables remained constant.

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132 FINANCIAL STATEMENTS

Notes to the Financial Statements

25. FINANCIAL INSTRUMENTS (CONTINUED)

25.7 Fair value information

The carrying amounts of cash and cash equivalents, short term receivables and payables and short term
borrowings reasonably approximate their fair values due to the relatively short term nature of these financial
instruments.

The carrying amounts of the hire purchase liabilities approximates their fair value as there is no material change
in the interest charged on similar kind of borrowings in the market.

The carrying amount of the floating rate term loans approximates its fair values as its effective interest rate
changes accordingly to movements in the market interest rate.

The table below analyses other financial instruments at fair value.

Fair value of financial

instruments carried Total Carrying
at fair value fair value amount
Level 2
RM’000 RM’000 RM’000
Group
2020
Financial liabilities
Forward exchange contracts (361) (361) (361)

2019
Financial liabilities
Forward exchange contracts (3) (3) (3)

Level 2 fair value

Level 2 fair value is estimated using inputs other than quoted prices included within Level 1 that are observable
for the financial assets or liabilities, either directly or indirectly.

Derivatives

The fair value of forward exchange contracts is estimated by discounting the difference between the contractual
forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate.

Transfers between Level 1 and Level 2 fair values

There has been no transfer between Level 1 and Level 2 fair values during the year (2019: no transfer in either
directions).

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 133

Notes to the Financial Statements

26. CAPITAL MANAGEMENT

The Group’s objectives when managing capital is to maintain a strong capital base and safeguard the Group’s ability
to continue as a going concern, so as to maintain investor, creditor and market confidence and to sustain future
development of the business. The Directors monitor and are determined to maintain an optimal debt-to-equity ratio to
operate effectively with minimal external borrowings.

During the financial year ended 30 June 2020, the Group’s strategy was to maintain the debt-to-equity ratio at the lower
end range within 0.5 to 1.0. The debt and equity position of the Group are as follows:

Group
2020 2019
RM’000 RM’000
Total borrowings (Note 14) 31,642 33,668
Less: Cash and cash equivalents (Note 11) (46,341) (63,635)
(14,699) (29,967)
Total equity 485,100 492,608

No disclosure is made for debt-to-equity ratio as the Group is in a net positive cash position as at 30 June 2020.

There were no changes in the Group’s approach to capital management during the financial year.

Under the requirement of Bursa Malaysia Practice Note No. 17/2005, the Company is required to maintain a consolidated
shareholders’ equity equal to or not less than the 25 percent of the issued and paid-up capital (excluding treasury
shares) and such shareholders’ equity is not less than RM40 million. The Company has complied with this requirement.

27. CAPITAL COMMITMENT

Group
2020 2019
RM’000 RM’000
Capital expenditure commitments
Property, plant and equipment
Contracted but not provided for 2,932 4,942

28. RELATED PARTIES

Identity of related parties

For the purposes of these financial statements, parties are considered to be related to the Group if the Group or the
Company has the ability, directly or indirectly, to control or jointly control the party or exercise significant influence over
the party in making financial and operating decisions, or vice versa, or where the Group or the Company and the party
are subject to common control. Related parties may be individuals or other entities.

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134 FINANCIAL STATEMENTS

Notes to the Financial Statements

28. RELATED PARTIES (CONTINUED)

Identity of related parties (continued)

Related parties also include key management personnel defined as those persons having authority and responsibility
for planning, directing and controlling the activities of the Group either directly or indirectly and entity that provides key
management personnel services to the Group. The key management personnel include all the Directors of the Group,
and certain members of senior management of the Group.

The Group has related party relationship with its subsidiaries and key management personnel.

Significant related party transactions

Related party transactions have been entered into in the normal course of business under negotiated terms.
The significant related party transactions of the Group and the Company are shown below. The balances related to the
below transactions are shown in Note 9.

Group Company
2020 2019 2020 2019
RM’000 RM’000 RM’000 RM’000
A. Subsidiaries
Dividend income - - 5,000 6,500
Interest income - - 2,212 2,809
Advance to - - 6,033 4,847

B. Entities in which certain Directors/Directors’

close family members have substantial
financial interest
Sales of goods 282 346 - -
Purchases of machines - 32 - -

C. Key management personnel

Directors
- Fees 640 587 640 587
- Remunerations 800 933 43 38
- Benefits 37 32 - -
- Contributions to the state plans 139 100 - -
1,616 1,652 683 625

Senior management
- Remunerations 2,150 2,783 - -
- Benefits 19 46 - -
- Contributions to the state plans 400 467 - -
2,569 3,296 - -

Total short-term employee benefits 4,185 4,948 683 625

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 135

Notes to the Financial Statements

29. SIGNIFICANT CHANGES IN ACCOUNTING POLICIES

During the year, the Group adopted MFRS 16.

As a lessee

Where the Group is a lessee, the Group applied the requirements of MFRS 16 retrospectively with no cumulative effect
recognised in the retained earnings at 1 July 2019.

At 1 July 2019, for leases that were classified as operating lease under MFRS 117, lease liabilities were measured
at the present value of the remaining lease payments, discounted at the Group’s incremental borrowing rate as at 1 July
2019. The weighted-average rate applied is 4.5%. Right-of-use assets are measured at an amount equal to the lease
liability, adjusted by the amount of any prepaid or accrued lease payments.

The Group used the following practical expedients when applying MFRS 16 to leases previously classified as operating
lease under MFRS 117:

- applied a single discount rate to a portfolio of leases with similar characteristics;

- applied the exemption not to recognise right-of-use assets and liabilities for leases with less than 12 months of
lease term as at 1 July 2019;

- excluded initial direct costs from measuring the right-of-use asset at the date of initial application; and

- used hindsight when determining the lease term if the contract contains options to extend or terminate the lease.

Hire purchase arrangements previously classified as finance lease liabilities under MFRS 117 are now classified as hire
purchase liabilities at 1 July 2019.

Impacts on financial statements

Since the Group applied the requirements of MFRS 16 retrospectively with the cumulative effect of initial application at
1 July 2019, there are no adjustments made to the prior period presented.

The following table explains the difference between the operating lease commitments applying MFRS 117 at
30 June 2019, and lease liabilities recognised in the statement of financial position at 1 July 2019.

RM’000
Operating lease commitments at 30 June 2019 26,640
Discounted using the incremental borrowing rate at 1 July 2019 21,060
Extension and termination options reasonably certain to be exercised 2,473
Recognition exemption for short-term leases (133)
Lease liabilities recognised at 1 July 2019 23,400

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136 FINANCIAL STATEMENTS

Statement by Directors
Pursuant to Section 251(2) of the Companies Act 2016

In the opinion of the Directors, the financial statements set out on pages 68 to 135 are drawn up in accordance with Malaysian
Financial Reporting Standards, International Financial Reporting Standards and the requirements of the Companies Act 2016
in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as of 30 June 2020
and of their financial performance and cash flows for the financial year then ended.

Signed on behalf of the Board of Directors in accordance with a resolution of the Directors:

Goh Leng Kian

Director

Goh Miah Kiat

Director

Date: 9 October 2020

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 FINANCIAL STATEMENTS 137

Statutory Declaration
Pursuant to Section 251(1)(b) of the Companies Act 2016

I, Goh Chok Siang, the officer primarily responsible for the financial management of KAREX BERHAD, do solemnly and
sincerely declare that the financial statements set out on pages 68 to 135 are, to the best of my knowledge and belief,
correct and I make this solemn declaration conscientiously believing the declaration to be true, and by virtue of the Statutory
Declarations Act 1960.

Subscribed and solemnly declared by the above named Goh Chok Siang, NRIC: 710621-04-5081, MIA CA 14638,
at Kuala Lumpur in the Federal Territory on 9 October 2020.

Goh Chok Siang

Before me:
Samugam Vassoo (W 632)
Commissioner For Oaths

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138 FINANCIAL STATEMENTS

Independent Auditors’ Report

To the members of Karex Berhad

Report on the Audit of the Financial Statements

Opinion

We have audited the financial statements of Karex Berhad, which comprise the statements of financial position as at
30 June 2020 of the Group and of the Company, and the statements of profit or loss, statements of profit or loss and other
comprehensive income, statements of changes in equity and statements of cash flows of the Group and of the Company for
the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out
on pages 68 to 135.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Group and of the
Company as at 30 June 2020, and of their financial performance and their cash flows for the year then ended in accordance
with Malaysian Financial Reporting Standards, International Financial Reporting Standards and the requirements of the
Companies Act 2016 in Malaysia.

Basis for Opinion

We conducted our audit in accordance with approved standards on auditing in Malaysia and International Standards on
Auditing. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the
Financial Statements section of our auditors’ report. We believe that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.

Independence and Other Ethical Responsibilities

We are independent of the Group and of the Company in accordance with the By-Laws (on Professional Ethics, Conduct and
Practice) of the Malaysian Institute of Accountants (“By-Laws”) and the International Ethics Standards Board for Accountants’
International Code of Ethics for Professional Accountants (including International Independence Standards) (“IESBA
Code”), and we have fulfilled our other ethical responsibilities in accordance with the By-Laws and the IESBA Code.

Key Audit Matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial
statements of the Group and of the Company for the current year. These matters were addressed in the context of our audit
of the financial statements of the Group and of the Company as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.

Goodwill and intangible assets impairment assessment - Group

Refer to Note 2(f) - Significant accounting policies: Intangible assets and Note 6 - Intangible assets.

The key audit matter

The Group has goodwill of RM27,230,000, brands of RM62,373,000 and other intangible assets of RM5,947,000 with
indefinite useful life as at 30 June 2020 which are required to be tested for impairment on an annual basis. When a review of
impairment is conducted, the recoverable amount is determined based on discounted future cash flow projections using the
Group’s assumptions and assessment of the future results and prospects of the business. The key assumptions applied by
the Group in the cash flow projections are those relating to discount rates, revenue growth rates and profit margin.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 139

Independent Auditors’ Report

To the members of Karex Berhad

Key Audit Matters (continued)

Goodwill and intangible assets impairment assessment - Group (continued)

The key audit matter (continued)

We have identified this as a key audit matter because judgement is required in our assessment of the recoverable amount
and the significance of the carrying amount of goodwill, brands and other intangible assets with indefinite useful life in the
financial statements.

How the matter was addressed in our audit:

Our audit procedures performed in this area included, amongst others:

- We obtained the annual impairment assessment performed by the Group and agreed the cash flow projections to the
approved business plans and budgets.

- We checked the mathematical accuracy of the cash flow projections.

- We evaluated the historical accuracy of the cash flow projections, by comparing the cash flow forecasts used in the prior
year to the actual performance of the business in the current year.

- We assessed the appropriateness of key assumptions used in particular those relating to discount rates, revenue
growth rates and profit margin applied to the cash flows, with reference to internally and externally derived sources and
taking into account the Group’s historical forecasting accuracy.

- We also assessed whether the Group’s disclosures about the sensitivity of the outcome of the impairment assessment
to changes in key assumptions reflects the risks inherent in the valuation of goodwill, brands and other intangible
assets.

Inventories valuation - Group

Refer to Note 2(g) - Significant accounting policies: Inventories and Note 8 - Inventories.

The key audit matter

The Group is primarily involved in manufacturing and selling of condoms based on the design specification prescribed
by customers. As described in the significant accounting policies in Note 2(g) to the financial statements, inventories are
measured at lower of cost and net realisable value. As at 30 June 2020, the Group has reported significant inventory balance
of RM128,884,000.

The consumption of these pre-printed raw materials and the demand of finished goods depend on the likelihood of repeat
orders and/or the ability of the Group to sell these items. Pricing has been more competitive in the financial year under review
especially in the tender market. Hence, there is a high possibility that inventories, particularly those manufactured for the
tender market, may be quoted at a lower selling price.

The inventories valuation is identified as a key audit matter because judgment involved in assessing the level of inventory
write down required in order to ascertain that inventories are stated at the lower of cost and net realisable value.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

140 FINANCIAL STATEMENTS

Independent Auditors’ Report

To the members of Karex Berhad

Key Audit Matters (continued)

Inventories valuation - Group (continued)

How the matter was addressed in our audit:

Our audit procedures performed in this area included, amongst others:

- We assessed the appropriateness of the management’s approach in adopting the Group’s policy for slow-moving
inventories.

- We assessed the accuracy and reliability of the inventory aging and evaluated whether the provisions are in-line with
the Group’s policy.

- We evaluated the net realisable values for finished goods as at 30 June 2020 by comparing the most recent selling
prices of the finished goods to assess whether these exceeded the carrying value of inventories at year end.

Impairment on investment in subsidiaries - Company

Refer to Note 2(k)(ii) - Significant accounting policies: Impairment – other assets and Note 5 - Investments in subsidiaries.

The key audit matter

As at 30 June 2020, the carrying amount of the investments in subsidiaries of the Company amounted to RM283,675,000.

The Company is required to estimate the recoverable amount based on forecasting and discounting future cash flows and
to recognise impairment loss if the recoverable amount is less than its carrying amount in accordance with MFRS 136
Impairment of Assets.

In view of the inherent uncertainties and level of judgement required in evaluating the Company’s assumptions included
within the cash flows projections, impairment on investments in subsidiaries is determined as a key audit matter.

How the matter was addressed in our audit:

Our audit procedures performed in this area included, amongst others:

• We assessed the determination of CGUs and the indicators of impairment based on our understanding of the Group’s
business activities.

• Where indicators exist, we obtained the discounted cash flow projections of the CGUs identified for the recoverable
amount estimated and considered whether there were material inconsistencies with the approved business plans and
forecasts.

• We assessed the appropriateness of key assumptions used in particular those relating to revenue growth rates, profit
margin, discount rates and terminal value applied to the cash flows projections, by comparing to the historical and
current performance, internal business plans and forecasts and externally derived market data.

• We evaluated the Company’s sensitivity analyses around the key assumptions including revenue growth rates, profit
margin, discount rates and terminal value growth rates to the extent of the change that would result the assets to be
impaired.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 141

Independent Auditors’ Report

To the members of Karex Berhad

Information Other than the Financial Statements and Auditors’ Report Thereon

The Directors of the Company are responsible for the other information. The other information comprises the information
included in the annual report , but does not include the financial statements of the Group and of the Company and our
auditors’ report thereon.

Our opinion on the financial statements of the Group and of the Company does not cover the annual report and we do not
express any form of assurance conclusion thereon.

In connection with our audit of the financial statements of the Group and of the Company, our responsibility is to read the
annual report and, in doing so, consider whether the annual report is materially inconsistent with the financial statements
of the Group and of the Company or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of the annual report, we are
required to report that fact. We have nothing to report in this regard.

Responsibilities of the Directors for the Financial Statements

The Directors of the Company are responsible for the preparation of financial statements of the Group and of the Company
that give a true and fair view in accordance with Malaysian Financial Reporting Standards, International Financial Reporting
Standards and the requirements of the Companies Act 2016 in Malaysia. The Directors are also responsible for such internal
control as the Directors determine is necessary to enable the preparation of financial statements of the Group and of the
Company that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements of the Group and of the Company, the Directors are responsible for assessing the ability
of the Group and of the Company to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or the Company or
to cease operations, or have no realistic alternative but to do so.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements of the Group and of the Company
as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance
with approved standards on auditing in Malaysia and International Standards on Auditing will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in
the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these
financial statements.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

142 FINANCIAL STATEMENTS

Independent Auditors’ Report

To the members of Karex Berhad

Auditors’ Responsibilities for the Audit of the Financial Statements (continued)

As part of an audit in accordance with approved standards on auditing in Malaysia and International Standards on Auditing,
we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the financial statements of the Group and of the Company,
whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control of the
Group and of the Company.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related
disclosures made by the Directors.

• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit
evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt
on the ability of the Group or of the Company to continue as a going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements of
the Group and of the Company or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based
on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause
the Group or the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the financial statements of the Group and of the Company,
including the disclosures, and whether the financial statements of the Group and of the Company represent the
underlying transactions and events in a manner that gives a true and fair view.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the Group to express an opinion on the financial statements of the Group. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the Directors regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on
our independence, and where applicable, actions taken to eliminate threats or safeguards applied.

From the matters communicated with the Directors, we determine those matters that were of most significance in the audit
of the financial statements of the Group and of the Company for the current year and are therefore the key audit matters.
We describe these matters in our auditors’ report unless law or regulation precludes public disclosure about the matter or
when, in extremely rare circumstances, we determine that a matter should not be communicated in our auditors’ report
because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 FINANCIAL STATEMENTS 143

Independent Auditors’ Report

To the members of Karex Berhad

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act 2016 in Malaysia, we report that the subsidiaries of which we have
not acted as auditors are disclosed in Note 5 to the financial statements.

Other Matter

This report is made solely to the members of the Company, as a body, in accordance with Section 266 of the Companies Act
2016 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

KPMG PLT Lam Shuh Siang

(LLP0010081-LCA & AF 0758) Approval Number: 03045/02/2021 J
Chartered Accountants Chartered Accountant

Johor Bahru

Date: 9 October 2020

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

144 SHAREHOLDERS’ INFORMATION

List of Properties

No. Address Land Description/ Date of Tenure Year of Approximate Net book
area/ Existing use acquisition expiry age of value at
Build up buildings 30 June
area 2020
Sq ft Years RM’000
1 PTD 7906, 9,354/ 1 ½ storey 05/04/2000 Freehold - 27 487
Taman Pontian Jaya, 5,460 semi-detached
Batu 34 Jalan Johor, building which
82000 Pontian, we use as
Johor Darul Takzim office,
factory and
warehouse

2 PTD 7907, 10,807/ 1 ½ storey 05/04/2000 Freehold - 27 487

Taman Pontian Jaya, 5,460 semi-detached
Batu 34 Jalan Johor, building which
82000 Pontian, we use as
Johor Darul Takzim office,
factory and
warehouse

3 Lot 1235, Benut, 225,418/ Vacant Land 10/09/2002 Freehold - - 853

82000 Pontian, -
Johor Darul Takzim

4 PTD 7915, 9,720/ 1 ½ storey 22/02/2005 Freehold - 27 526

Taman Pontian Jaya, 5,460 semi-detached
Batu 34 Jalan Johor, building which
82000 Pontian, we use as
Johor Darul Takzim warehouse

5 Lot 2767, 781,335/ Building under 21/10/2010 Freehold - - 10,508

Jalan Johor, - construction
82000 Pontian,
Johor Darul Takzim

6 Lot 1863, Batu 39 ½, 18,241/ Single Storey 27/07/2015 Leasehold October 27 611
Jalan Johor, 7,798 semi-detached 99 years 2063
82000 Pontian, building which
Johor Darul Takzim we use as
office,
factory and
warehouse

7 Lot 2491, Batu 39 ½, 54,450/ Single Storey 27/07/2015 Leasehold October 27 2,282
Jalan Johor, 21,385 semi-detached 99 years 2063
82000 Pontian, building which
Johor Darul Takzim we use as
office,
factory and
warehouse

8 Lot 2244, Batu 39 ½, 39,204/ Single Storey 27/07/2015 Leasehold October 27 1,692
Jalan Johor, 6,439 semi-detached 99 years 2063
82000 Pontian, building which
Johor Darul Takzim we use as
office,
factory and
warehouse

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 SHAREHOLDERS’ INFORMATION 145

List of Properties

No. Address Land Description/ Date of Tenure Year of Approximate Net book
area/ Existing use acquisition expiry age of value at
Build up buildings 30 June
area 2020
Sq ft Years RM’000
9 Lot 2256, Batu 39 ½, 199,477/ Single Storey 27/07/2015 Freehold - 27 9,903
Jalan Johor, 128,808 semi-detached
82000 Pontian, building which
Johor Darul Takzim we use as office,
factory and
warehouse

10 Lot 1368, Batu 39 ½, 37,598/ Vacant Land 27/07/2015 Agriculture - - 376

Jalan Johor, - Freehold
82000 Pontian,
Johor Darul Takzim

11 Lot 1369, Batu 39 ½, 101,549/ Vacant Land 27/07/2015 Agriculture - - 1,387

Jalan Johor, - Freehold
82000 Pontian,
Johor Darul Takzim

12 Lot 2515, Batu 39 ½, 37,026/ Vacant Land 27/07/2015 Agriculture - - 370

Jalan Johor, - Freehold
82000 Pontian,
Johor Darul Takzim

13 Lot 591, 43,560/ 1 ½ storey 09/03/2012 Leasehold September 29 5,756

Persiaran Raja Lumu, 28,908 building which 99 years 2074
Pandamaran Industrial we use as office,
Estate, factory and
42000 Port Klang, warehouse
Selangor Darul Ehsan

14 Lot 594, 43,560/ 3-Storey 20/10/2003 Leasehold September 32 10,011

Persiaran Raja Lumu, 63,907 building which 99 years 2074
Pandamaran Industrial we use as office,
Estate, factory and
42000 Port Klang, warehouse
Selangor Darul Ehsan

15 PTD 8746, 61,680/ Vacant Land 14/10/2005 Leasehold November - 281

Taman Perindustrian - 60 years 2056
Pontian,
82000 Pontian,
Johor Darul Takzim.

16 Land slot No: E1-6 64,446/ 1 ½ storey 30/04/2003 Leasehold April 15 2,074
Export Processing Zone, 37,835 building which 30 years 2033
Southern Industrial we use as office,
Estate Village 4, factory and
Tumbol Chalung, warehouse
Amphur Hat Yai,
Songkhla, Thailand

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

146 SHAREHOLDERS’ INFORMATION

List of Properties

No. Address Land Description/ Date of Tenure Year of Approximate Net book
area/ Existing use acquisition expiry age of value at
Build up buildings 30 June
area 2020
Sq ft Years RM’000
17 Land slot No: E1-7 65,182/ Single storey 09/02/2003 Leasehold February 15 3,243
Export Processing Zone, 29,773 building which 30 years 2036
Southern Industrial we use as office,
Estate Village 4, factory and
Tumbol Chalung, warehouse
Amphur Hat Yai,
Songkhla, Thailand

18 Land slot No: E1-8 65,448/ Single storey 01/11/2012 Leasehold October 6 3,843
Export Processing Zone, 43,099 building which 30 years 2042
Southern Industrial we use as
Estate Village 4, warehouse
Tumbol Chalung,
Amphur Hat Yai,
Songkhla, Thailand

19 Land slot No: E1-9-11 194,394/ Single storey 01/08/2014 Leasehold July 5 22,728
Export Processing Zone, 105,092 factory 30 years 2044
Southern Industrial
Estate Village 4,
Tumbol Chalung,
Amphur Hat Yai,
Songkhla, Thailand

20 Land slot No: E14-15 137,778/ 1 ½ storey 20/10/2016 Leasehold October 4 8,875
Export Processing Zone, 69,406 building, which 30 years 2046
Southern Industrial we use as factory
Estate Village 4, and warehouse
Tumbol Chalung,
Amphur Hat Yai,
Songkhla, Thailand

21 PTD 8780, PLO8, 174,235/ Single storey 12/01/1983 Leasehold January 35 7,250
Jalan Perindustrian, Senai 76,844 building which 60 years 2043
Industrial Estate 1, we use as office,
81400 Senai, factory and
Johor Darul Takzim warehouse

22 PTD 8786, PLO11, 87,123/ Single storey 23/09/1985 Leasehold September 35 1,640
Jalan Perindustrian, 1,956 building which 60 years 2045
Senai Industrial Estate 1, we use as factory
81400 Senai, and warehouse
Johor Darul Takzim

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 SHAREHOLDERS’ INFORMATION 147

Analysis of Shareholdings
As at 30 September 2020

Total Issued Share (RM) : RM281,980,000.00

Total Issued Share : 1,002,375,000 of Ordinary Shares
Class of Shares : Ordinary Share
Voting Rights : One vote per Ordinary Share
Number of Shareholders : 16,183

DISTRIBUTION OF SHAREHOLDINGS

No. of % of No. of % of Issued

Size of Shareholdings Shareholders Shareholders Shares Share Capital
Less than 100 433 2.67% 17,791 0.00%
100 - 1,000 2,173 13.43% 1,433,861 0.14%
1,001 - 10,000 8,528 52.70% 44,235,185 4.41%
10,001 - 100,000 4,493 27.76% 142,341,539 14.20%
100,001 to less than 5% of issued shares 553 3.42% 488,567,398 48.75%
5% and above of issued shares 3 0.02% 325,779,226 32.50%
Total 16,183 100.00% 1,002,375,000 100.00%

LIST OF DIRECTORS’ SHAREHOLDINGS AS PER THE REGISTER OF DIRECTORS’ SHAREHOLDING AS AT 30 SEPTEMBER 2020

Direct Interest Indirect Interest

Name of Directors No of Shares % No of Shares %
Tun Dato’ Seri Arshad Ayub 15,100,000 1.51 5,200,000 (1)
0.52
Dato’ Dr. Ong Eng Long @ Ong Siew Chuan 860,000 0.09 - -
Prof. Dato’ Dr. Adeeba Binti Kamarulzaman - - - -
Wong Yien Kim - - - -
Law Ngee Song 258,750 0.03 - -
Lam Jiuan Jiuan 19,087,456 1.90 262,402,056 (2)
26.18
Goh Yen Yen 72,062,456 7.19 - -
Goh Leng Kian 41,368,865 4.13 184,823,750 (3)
18.44
Goh Miah Kiat 47,350,097 4.72 184,250,000 (4)
18.38

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148 SHAREHOLDERS’ INFORMATION

Analysis of Shareholdings
As at 30 September 2020

LIST OF SUBSTANTIAL SHAREHOLDERS AS PER THE REGISTER OF SUBSTANTIAL SHAREHOLDERS AS AT

30 SEPTEMBER 2020

Indirect Holdings
Name of Substantial Direct Holdings (excluding bare trustees)
Shareholders No. % No. %
Karex One Limited 184,250,000 18.38 - -
Lam Yiu Pang Albert 64,312,456 6.42 217,177,056 (5)
21.67
Lam Jiuan Jiuan 19,087,456 1.90 262,402,056 (2)
26.18
Goh Yen Yen 72,062,456 7.19 - -
Goh Ai Noi - - 209,412,456 (6)
20.89
Goh Yin 78,452,170 7.83 - -
Goh Leng Kian 41,368,865 4.13 184,823,750 (3)
18.44
Goh Miah Kiat 47,350,097 4.72 184,250,000(4) 18.38

(1)
Deemed interested by virtue of interest held by Zalaraz Sdn Bhd pursuant to Section 8 of the Companies Act 2016.
(2)
Deemed interested by virtue of her interest in AJNA Holdings Limited, Maharani Limited and Karex One Limited pursuant to
Section 8 of the Companies Act 2016 and interest held by her spouse pursuant to Section 59 (11) (c) of the Companies Act
2016.
(3)
Deemed interested by virtue of his interest in Karex One Limited pursuant to Section 8 of the Companies Act 2016 and
interest held by his spouse pursuant to Section 59 (11) (c) of the Companies Act 2016.
(4)
Deemed interested by virtue of his interest in Karex One Limited pursuant to Section 8 of the Companies Act 2016.
(5)
Deemed interested by his interest in AJNA Holdings Limited and Maharani Limited pursuant to Section 8 of the Companies
Act 2016 and interest held by his spouse.
(6)
Deemed interested by virtue of her interest in Karex One Limited and Jeyya Ltd pursuant to Section 8 of the Companies Act
2016.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 SHAREHOLDERS’ INFORMATION 149

Thirty Largest Shareholders

As at 30 September 2020

No. Name of Shareholders No. of Shares %

1. HSBC NOMINEES (ASING) SDN. BHD. 175,264,600 17.48
EXEMPT AN FOR BNP PARIBAS SINGAPORE BRANCH (A/C CLIENTS-FGN)
2. CIMSEC NOMINEES (TEMPATAN) SDN. BHD. 78,452,170 7.83
CIMB FOR GOH YIN (PB)
3. CIMSEC NOMINEES (TEMPATAN) SDN BHD 72,062,456 7.19
CIMB FOR GOH YEN YEN (PB)
4. HSBC NOMINEES (ASING) SDN BHD 46,300,000 4.62
EXEMPT AN FOR CREDIT SUISSE (HK BR-TST-ASING)
5. CIMSEC NOMINEES (ASING) SDN BHD 25,162,456 2.51
CIMB FOR JEYYA LIMITED (PB)
6. CIMSEC NOMINEES (ASING) SDN BHD 24,312,456 2.43
CIMB FOR LAM YIU PANG ALBERT (PB)
7. MAYBANK NOMINEES (TEMPATAN) SDN BHD 22,000,000 2.19
PLEDGED SECURITIES ACCOUNT FOR GOH MIAH KIAT
8. CIMSEC NOMINEES (ASING) SDN BHD 19,087,456 1.90
CIMB FOR LAM JIUAN JIUAN (PB)
9. CIMSEC NOMINEES (TEMPATAN) SDN BHD 18,468,865 1.84
CIMB FOR GOH LENG KIAN (PB)
10. HLIB NOMINEES (TEMPATAN) SDN BHD 16,350,000 1.63
PLEDGED SECURITIES ACCOUNT FOR GOH MIAH KIAT
11. MAYBANK INVESTMENT BANK BERHAD 15,117,200 1.51
IVT (10)
12. CIMSEC NOMINEES (ASING) SDN BHD 12,825,000 1.28
CIMB FOR AJNA HOLDINGS LIMITED (PB)
13. CARTABAN NOMINEES (ASING) SDN BHD 11,670,050 1.16
EXEMPT AN FOR STANDARD CHARTERED BANK SINGAPORE BRANCH
(BJSSSGBR-CL-FR)
14. CIMSEC NOMINEES (ASING) SDN BHD 10,000,000 1.00
CIMB FOR KAREX ONE LIMITED (PB)
15. CIMSEC NOMINEES (TEMPATAN) SDN BHD 9,000,097 0.90
CIMB FOR GOH MIAH KIAT (PB)
16. CGS-CIMB NOMINEES (TEMPATAN) SDN BHD 9,000,000 0.90
PLEDGED SECURITIES ACCOUNT FOR ARSHAD BIN AYUB (MY1393)
17. CIMSEC NOMINEES (TEMPATAN) SDN BHD 9,000,000 0.90
CIMB BANK FOR GOH LENG KIAN (PBCL-0G0199)
18. MAYBANK NOMINEES (TEMPATAN) SDN BHD 9,000,000 0.90
PLEDGED SECURITIES FOR GOH LENG KIAN
19. CIMSEC NOMINEES (TEMPATAN) SDN BHD 8,250,000 0.82
CIMB BANK FOR GOH SIANG (PBCL-0G0200)

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

150 SHAREHOLDERS’ INFORMATION

Thirty Largest Shareholders

As at 30 September 2020

No. Name of Shareholders No. of Shares %

20. HSBC NOMINEES (ASING) SDN BHD 7,750,000 0.77
EXEMPT AN FOR CREDIT SUISSE (SG BR-TST-ASING)
21. MAYBANK NOMINEES (TEMPATAN) SDN BHD 6,100,000 0.61
PLEDGED SECURITIES ACCOUNT FOR ARSHAD BIN AYUB
22. CGS-CIMB NOMINEES (TEMPATAN) SDN BHD 5,200,000 0.52
PLEDGED SECURITIES ACCOUNT FOR ZALARAZ SDN BHD (MY3113)
23. TA NOMINEES (TEMPATAN) SDN BHD 5,000,000 0.50
PLEDGED SECURITIES ACCOUNT FOR ANITHA BINTI MOHAMED HANIFFA
24. AMSEC NOMINEES (TEMPATAN) SDN BHD 4,971,100 0.50
PLEDGED SECURITIES ACCOUNT FOR QUEK SEE KUI
25. HLIB NOMINEES (TEMPATAN) SDN BHD 4,950,000 0.49
PLEDGED SECURITIES ACCOUNT FOR GOH LENG KIAN
26. CIMSEC NOMINEES (ASING) SDN BHD 4,523,625 0.45
CIMB FOR ORBIS REX LIMITED (PB)
27. UOB KAY HIAN NOMINEES (TEMPATAN) SDN BHD 4,200,000 0.42
PLEDGED SECURITIES ACCOUNT FOR TEH CHAN SHERNG
28. HUANG HWA YONG 4,093,400 0.41
29. PUBLIC NOMINEES (TEMPATAN) SDN BHD 3,800,000 0.38
PLEDGED SECURITIES ACCOUNT FOR TAN TECK SOON (E-SS2)
30. CHEW CHENG CHUAN 3,398,000 0.34
TOTAL 645,308,931 64.38

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 SHAREHOLDERS’ INFORMATION 151

Notice of 8th Annual General Meeting

NOTICE IS HEREBY GIVEN THAT the Eighth Annual General Meeting (“8th AGM”) of Karex Berhad (“Karex” or “Company”) will be
conducted on a fully virtual and live-stream from the broadcast venue at Meeting Room TR-12-R02, 12th Floor, Menara Symphony,
No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor, Malaysia on Friday, 27 November 2020 at 10:00 am
for the purpose of considering the following businesses:

AGENDA
Ordinary Business
1. To receive the Audited Financial Statements for the financial year ended 30 June 2020 together with the Reports of the Directors
and the Auditors thereon.
(Refer to Explanatory Note (a))

2. To re-elect Tun Dato’ Seri Arshad Ayub who is retiring in accordance with the Clause 97 of the Company’s Constitution, and
being eligible, has offered himself for re-election.
(Ordinary Resolution 1)

3. To re-elect Dato’ Dr. Ong Eng Long @ Ong Siew Chuan who is retiring in accordance with the Clause 97 of the Company’s
Constitution, and being eligible, has offered himself for re-election.
(Ordinary Resolution 2)

4. To re-elect Mr Goh Miah Kiat who is retiring in accordance with the Clause 104 of the Company’s Constitution, and being
eligible, has offered himself for re-election.
(Ordinary Resolution 3)

5. To approve the payment of Directors’ fees of RM640,000.00 for the financial year ended 30 June 2020.
(Ordinary Resolution 4)

6. To approve the payment of Directors’ benefits (excluding Directors’ fees) payable to the Directors of the Company and its
subsidiaries up to an amount of RM61,000.00 for the financial period from 1 December 2020 to 30 November 2021.
(Ordinary Resolution 5)

7. To re-appoint Messrs KPMG PLT as Auditors of the Company until the conclusion of the next Annual General Meeting and to
authorise the Directors to fix their remuneration.
(Ordinary Resolution 6)

Special Business
To consider and if thought fit, pass the following Ordinary Resolutions with or without any modifications:

8. Ordinary Resolution
Final Single Tier Dividend

To approve the payment of a final dividend of 0.5 sen per ordinary share for the financial year ended 30 June 2020.
(Ordinary Resolution 7)
9. Ordinary Resolution
Authority to Issue and Allot Shares

“THAT subject always to the Companies Act 2016 (“the Act”), Constitution of the Company and approvals from Bursa Malaysia
Securities Berhad and any other governmental/regulatory bodies, where such approval is necessary, authority be and is hereby given
to the Directors pursuant to Section 75 of the Act to issue and allot not more than ten percent (10%) of the total number of issued
shares (excluding treasury shares) of the Company at any time upon any such terms and conditions and for such purposes as the
Directors may in their absolute discretion deem fit or in pursuance of offers, agreements or options to be made or granted by the
Directors while this approval is in force until the conclusion of the next Annual General Meeting of the Company pursuant to Section
76 of the Act and that the Directors be and are hereby further authorised to make or grant offers, agreements or options which would
or might require shares to be issued after the expiration of the approval hereof.”
(Ordinary Resolution 8)

10. To transact any other business of which due notice shall have been given in accordance with the Act.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

152 SHAREHOLDERS’ INFORMATION

Notice of 8th Annual General Meeting

Notice of Dividend Entitlement and Payment

NOTICE IS HEREBY GIVEN THAT subject to the approval of the shareholders at the 8th AGM, a final dividend of 0.5 sen per ordinary
share for the financial year ended 30 June 2020, if approved, will be paid on 21 December 2020 to holders of ordinary shares
registered in the Record of Depositors of the Company at the close of business on 4 December 2020.

A depositor shall qualify for entitlement to the dividend only in respect of:
a) Securities transferred into the Depositor’s Securities Account before 4.30 pm on 4 December 2020 in respect of transfers; and
b) Securities bought on the Bursa Malaysia Securities Berhad (“Bursa Securities”) on a cum entitlement basis according to the
Rules of the Bursa Securities.

BY ORDER OF THE BOARD

LIM LEE KUAN (SSM PC NO. 202008001079) (MAICSA 7017753)
TEO MEE HUI (SSM PC NO. 202008001081) (MAICSA 7050642)
ELIZABETH ALLISON DE ZILVA (SSM PC NO. 202008002112) (MAICSA 7030086)
Company Secretaries

Selangor Darul Ehsan

Dated this 28th day of October 2020

Notes:
1. In support of the Government of Malaysia’s (the Government) ongoing efforts to contain the spread of the Coronavirus (Covid-19) and the
Government’s advice of social distancing and not having mass gatherings, the Company would like to leverage on technology advancement
by conducting the Eighth Annual General Meeting of the Company (the Meeting or AGM) on a fully virtual basis through electronic live
streaming and online remote voting, pursuant to Section 327(2) of the Companies Act 2016 and Clause 59 of the Company’s Constitution.
The Company will be using Boardroom’s LUMI AGM solution at https://web.lumiagm.com/ or you may download the free “Lumi AGM” app from
the Apple App Store or Google Play Store. Please follow the procedures as stipulated in the Administrative Details for the Meeting in order to
register, participate and vote virtually via the Boardroom’s LUMI AGM solution.

2. The main and only venue of the virtual Meeting is strictly to serve as the broadcast venue where the chairman of the Meeting is physically
present and no shareholders/proxies shall be physically present at the broadcast venue. The Meeting will be in compliance with Section
327(2) of the Companies Act 2016 which provides that the main venue of the AGM shall be in Malaysia and the chairperson must be present
at the main venue of the AGM. The electronic means of conducting the AGM on a fully virtual basis will facilitate and enable all shareholders to
participate fully in the proceedings by audio and/or video capabilities without the need to be physically present at the Meeting venue, which is
advantageous given the current circumstances relating to Covid-19 and best health practices.

3. A member entitled to virtually attend and vote at the above Meeting is entitled to appoint a proxy or proxies to exercise all or any of his rights
to virtually attend, participate, interact and vote in his/her stead, in accordance with the Administrative Details.

4. Where a member appoints more than one (1) proxy, the appointment shall be invalid unless he/she specifies the proportion of his/her holdings
to be represented by each proxy.

5. Where a member is an authorised nominee as defined in the Securities Industry (Central Depositories) Act, 1991, it may appoint not more than
two (2) proxies in respect of each Securities Account it holds in ordinary shares of the Company standing to the credit of the said Securities
Account.

6. Where a member is an Exempt Authorised Nominee which holds ordinary shares in the Company for multiple beneficial owners in one Securities
Account (“Omnibus Account”), there is no limit to the number of proxies which the Exempt Authorised Nominee may appoint in respect of each
Omnibus Account it holds. Where the Exempt Authorised Nominee appoints two (2) or more proxies to attend and vote at the same meeting,
such appointment shall be invalid unless the Exempt Authorised Nominee specifies the proportion of his holdings to be represented by each
proxy.

7. The instrument appointing a proxy shall be in writing under the hand of the appointor or his attorney duly authorised in writing or, if the appointor
is a corporation, either under the corporation’s seal or under the hand of an officer or attorney duly authorised.

8. The instrument appointing a proxy must be deposited at the registered office of the Company at 10th Floor, Menara Hap Seng,
No. 1 & 3 Jalan P. Ramlee, 50250 Kuala Lumpur, Malaysia or via electronic means through the Boardroom Smart Investor Online Portal at
http://www.boardroomlimited.my (please refer to the Administrative Details) not less than forty-eight (48) hours before the time for holding the
meeting or any adjournment thereof.

9. Shareholders/proxies/corporate representatives are encouraged to refer to the procedures set out in the Administrative Details in order to
participate remotely.

10. Date of Record of Depositors for the purpose of determining Members’ entitlement to attend, vote and interact at the Annual General Meeting
is 20 November 2020.

Karex B e rh a d ( Re g i s t ra tio n No : 2 012 010 3 4 0 9 1 ( 1018 5 7 9 - U ))

 SHAREHOLDERS’ INFORMATION 153

Notice of 8th Annual General Meeting

EXPLANATORY NOTES ON ORDINARY AND SPECIAL BUSINESS:

a) Item 1 of the Agenda
Audited Financial Statements for the financial year ended 30 June 2020

This Agenda item is meant for discussion only, as the provisions of Section 248 and Section 340 (i)(a) of the Companies Act
2016 does not require a formal approval of the shareholders for the Audited Financial Statements. Hence, this Agenda item is
not put forward for voting.

b) Retirement of Director
Mr Law Ngee Song who was appointed as an Independent Non-Executive Director of the Company on 30 November 2012 will
retire in accordance with Clause 97 of the Company’s Constitution. He has informed the Board of his intention to retire as a
Director and therefore would not be seeking for re-election at this Annual General Meeting. Hence, he will retire from his office
upon the conclusion of the 8th AGM.

c) Ordinary Resolutions 4 & 5

Payment of Directors’ fees and benefits made payable to the Directors

Section 230(1) of the Act, provides amongst others, that the fees of the Directors and any benefits payable to the Directors of
a listed company and its subsidiaries shall be approved at a general meeting.

In this respect, the Board wishes to seek shareholders’ approval at the 8th AGM for the payment of Directors’ fees and benefit
payable to the Directors in two (2) separate resolutions as below:

(i) Resolution 4 on the proposed Directors’ fees of RM640,000.00 in respect of the financial year ended 30 June 2020;

(ii) Resolution 5 on the payment of Directors’ Benefits (excluding Directors’ Fees) payable to the Directors of the
Company and its subsidiaries up to an amount of RM61,000.00 for the financial period from 1 December 2020 to
30 November 2021. The benefits comprise the meeting allowance, which will only be accorded based on actual
attendance of meetings by the Directors.

d) Ordinary Resolutions 8
Authority to Issue and Allot Shares

The proposed Ordinary Resolution, if approved, will give flexibility to the Directors of the Company to issue shares up to a
maximum of ten per centum (10%) of the issued share capital of the Company at the time of such issuance of shares and for
such purposes as they consider would be in the best interest of the Company without having to convene separate general
meetings. This authority, unless revoked or varied at a general meeting, will expire at the conclusion of the next Annual
General Meeting of the Company.

This is the renewal of the mandate obtained from the shareholders at the last Annual General Meeting (“the previous mandate”).
The previous mandate was not utilised and no proceeds were raised. The purpose of this general mandate sought will provide
flexibility to the Company for any possible fund-raising activities but not limited for further placement of shares for purpose of
funding current and/or future investment projects, working capital, repayment of borrowings and/or acquisitions.

Karex B erhad (Regi strati on N o: 201201034091 (1018579-U ))

This page has been intentionally left blank.
Form of Proxy
KAREX BERHAD
(Registration No: 201201034091 (1018579-U))
(Incorporated in Malaysia)

Number of Shares Held

CDS Account No.

* I/We

NRIC/No./Passport/No./Company No.

of

being a Member(s) of KAREX BERHAD (Registration No: 201201034091 (1018579-U)), hereby appoint

Name E Mail Address NRIC/Passport No. Proportion of Shareholdings (%)

*And/or (delete as appropriate)

or failing him/her, #THE CHAIRMAN OF THE MEETING as *my/our proxy to vote for *me/us on *my/our behalf at the Eighth Annual General
Meeting (“8th AGM”) of the Company to be conducted virtually and live-stream from the broadcast area at Meeting Room TR-12-R02, 12th Floor,
Menara Symphony, No. 5, Jalan Prof. Khoo Kay Kim, Seksyen 13, 46200 Petaling Jaya, Selangor, Malaysia on Friday, 27 November 2020 at
10:00 am or at any adjournment thereof and to vote as indicated below:

Ordinary Resolutions For Against

Ordinary Business
1. To re-elect Tun Dato’ Seri Arshad Ayub as a Director of the Company
2. To re-elect Dato’ Dr. Ong Eng Long @ Ong Siew Chuan as a Director of the Company
3. To re-elect Mr Goh Miah Kiat as a Director of the Company
4. To approve the payment of Directors’ fees
5. To approve the payment of Directors’ Benefits (excluding Directors’ Fees)
6. To re-appoint Messrs KPMG PLT as Auditors of the Company
Special Business
7. To approve a Final Dividend
8. Authority to issue and allot shares

Note: Please note that the short descriptions given above of the Resolutions to be passed do not in any way whatsoever reflect the intent and purpose
of the Resolutions. The short descriptions have been inserted for convenience only. Shareholders are encouraged to refer to the Notice of Annual
General Meeting for the full purpose and intent of the Resolutions to be passed.

Mark either box if you wish to direct the proxy how to vote. If no mark is made the proxy may vote on the resolution or abstain from voting as the
proxy thinks fit. If you appoint two proxies and wish them to vote differently this should be specified.

#
If you wish to appoint other person(s) to be your proxy/proxies, kindly delete the words “The Chairman of the Meeting” and insert the
name(s) of the person(s) desired.
* Delete if not applicable.

Signed this day of 2020

Signature/Common Seal of Shareholder
Notes:
1. In support of the Government of Malaysia’s (the Government) ongoing efforts to contain
the spread of the Coronavirus (Covid-19) and the Government’s advice of social distancing
and not having mass gatherings, the Company would like to leverage on technology
advancement by conducting the Eighth Annual General Meeting of the Company (the
Meeting or AGM) on a fully virtual basis through electronic live streaming and online
remote voting, pursuant to Section 327(2) of the Companies Act 2016 and Clause 59 of
the Company’s Constitution. The Company will be using Boardroom’s LUMI AGM solution
at https://web.lumiagm.com/ or you may download the free “Lumi AGM” app from the
Apple App Store or Google Play Store. Please follow the procedures as stipulated in the
Administrative Details for the Meeting in order to register, participate and vote virtually via
the Boardroom’s LUMI AGM solution.
2. The main and only venue of the virtual Meeting is strictly to serve as the broadcast venue
where the chairman of the Meeting is physically present and no shareholders/proxies
shall be physically present at the broadcast venue. The Meeting will be in compliance
with Section 327(2) of the Companies Act 2016 which provides that the main venue of
the AGM shall be in Malaysia and the chairperson must be present at the main venue
of the AGM. The electronic means of conducting the AGM on a fully virtual basis will
facilitate and enable all shareholders to participate fully in the proceedings by audio and/
or video capabilities without the need to be physically present at the Meeting venue, which
is advantageous given the current circumstances relating to Covid-19 and best health
practices.
3. A member entitled to virtually attend and vote at the above Meeting is entitled to appoint
a proxy or proxies to exercise all or any of his rights to virtually attend, participate, interact
and vote in his/her stead, in accordance with the Administrative Details.
Fold here
The Company Secretary
KAREX BERHAD
(Registration No: 201201034091 (1018579-U))
10th Floor, Menara Hap Seng,
No. 1 & 3 Jalan P. Ramlee
50250 Kuala Lumpur
Malaysia
Fold here
4. Where a member appoints more than one (1) proxy, the appointment shall be invalid
unless he/she specifies the proportion of his/her holdings to be represented by each proxy.
5. Where a member is an authorised nominee as defined in the Securities Industry (Central
Depositories) Act, 1991, it may appoint not more than two (2) proxies in respect of each
Securities Account it holds in ordinary shares of the Company standing to the credit of the
said Securities Account.
6. Where a member is an Exempt Authorised Nominee which holds ordinary shares in the
Company for multiple beneficial owners in one Securities Account (“Omnibus Account”),
there is no limit to the number of proxies which the Exempt Authorised Nominee may
appoint in respect of each Omnibus Account it holds. Where the Exempt Authorised
Nominee appoints two (2) or more proxies to attend and vote at the same meeting,
such appointment shall be invalid unless the Exempt Authorised Nominee specifies the
proportion of his holdings to be represented by each proxy.
7. The instrument appointing a proxy shall be in writing under the hand of the appointor or
his attorney duly authorised in writing or, if the appointor is a corporation, either under the
corporation’s seal or under the hand of an officer or attorney duly authorised.
8. The instrument appointing a proxy must be deposited at the registered office of the
Company at 10th Floor, Menara Hap Seng, No. 1 & 3 Jalan P. Ramlee, 50250 Kuala
Lumpur, Malaysia or via electronic means through the Boardroom Smart Investor Online
Portal at http://www.boardroomlimited.my (please refer to the Administrative Details) not
less than forty-eight (48) hours before the time for holding the meeting or any adjournment
thereof.
9. Shareholders/proxies/corporate representatives are encouraged to refer to the procedures
set out in the Administrative Details in order to participate remotely.
10. Date of Record of Depositors for the purpose of determining Members’ entitlement to
attend, vote and interact at the Annual General Meeting is 20 November 2020.
Affix Stamp
KAREX BERHAD
(Registration No: 201201034091 (1018579-U))
Lot 594, Persiaran Raja Lumu, T : +603-3165 6688
Pandamaran Industrial Estate, F : +603-3166 2000
42000 Port Klang, E : karex@karex.com.my
Selangor, Malaysia. W : karex.com.my